FORM 10-K

SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

(Mark one)

|(X) |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
          1934 For the fiscal year ended December 31, 2004.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------

OR

|(   ) |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934     For the transition period from _____ to _____.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------

Commission file number 1-7160

COACHMEN INDUSTRIES,
INC. (Exact name of registrant as specified in its charter)

|                                               |                                            
|---------------------------------------------- | -------------------------------------------
|Indiana(State of incorporationor organization) | 35-1101097(IRS Employer Identification No.)

2831 Dexter Drive,
Elkhart, Indiana 46514 (Address of principal executive offices) (Zip Code)

(574) 262-0123(Registrants
telephone number, including area code)

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

|Common Stock, Without Par Value
and associated Common Share Purchase Rights(Title of each class) | New York Stock Exchange(Name of each exchange on
which registered)
|------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------

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. X Yes _ No

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

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). X Yes _
No

The aggregate market value of Common
Stock held by non-affiliates of the registrant on June 30, 2004 (the last business day of
the registrants most recently completed second fiscal quarter) was $224.4 million
(based upon the closing price on the New York Stock Exchange and that 90.0% of such shares
are owned by non-affiliates).

As of February 28, 2005, 15,724,839
shares of the registrants Common Stock were outstanding.

Documents Incorporated by
Reference

|                                                                                               |                              
|---------------------------------------------------------------------------------------------- | -----------------------------
|                                                                                               | Parts of Form 10-K into which
|Document                                                                                       | the Document is Incorporated 
|Portions of the Proxy Statement forthe Annual Meeting of Shareholdersto be held on May 5, 2005 | Part III                     

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Part I

Item 1. Business

Coachmen Industries, Inc. (the
Company or the Registrant) was incorporated under the laws of the
State of Indiana on December 31, 1964, as the successor to a proprietorship established
earlier that year. All references to the Company include its wholly owned subsidiaries and
divisions.

The Company is one of Americas
leading manufacturers of recreational vehicles with well-known brand names including
Coachmen®, Georgie Boy®, Sportscoach®, and Viking®. Through its housing
and building group, Coachmen Industries also comprises one of the nations largest
producers of both system-built homes and commercial structures with its All American
Homes®, Mod-U-Kraf®, All American Building Systems, and Miller Building
Systems products. Prodesign, LLC is a subsidiary that produces custom thermoformed
plastic parts for numerous industries under the Prodesign® brand. Coachmen Industries,
Inc. is a publicly held company with stock listed on the New York Stock Exchange (NYSE)
under the ticker symbol COA.

The Company operates in two primary
business segments, recreational vehicles and housing and buildings. The Recreational
Vehicle (RV) Segment manufactures and distributes Class A and Class C
motorhomes, travel trailers, fifth wheels, camping trailers and related parts and
supplies. The Housing and Building Segment manufactures and distributes system-built
modules for residential and commercial buildings.

The Companys annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
to those reports are made available free of charge through the Investor Relations section
of the Companys Internet website (http://www.coachmen.com) as soon as practicable
after such material is electronically filed with or furnished to the Securities and
Exchange Commission.

Recreational Vehicle
Segment

RV Segment Products

The RV Segment consists of
recreational vehicles and parts and supplies. This group consists of six operating
companies: Coachmen RV Company, LLC; Coachmen RV Company of Georgia, LLC; Coachmen RV
Licensed Products Division, LLC, Georgie Boy Manufacturing, LLC; Viking Recreational
Vehicles, LLC; and Prodesign, LLC (a producer of plastic parts), a Company-owned retail
dealership located in Indiana and a service facility located in Chino, California.

The principal brand names for the RV
group are Adrenaline, Aurora, Bellagio, Capri, Captiva,
Cascade, Catalina®, Chaparral, Clipper®, Coachmen®, Concord,
Cross Country®, Cruise Air®, Cruise Master®, Epic, Freedom by
Coachmen, Freelander by Coachmen, Futura, Georgie Boy,
Landau®, Legend, Leprechaun®, Mirada, Pursuit®, Saga,
Santara®, Somerset, Spirit of America®, Sportscoach®, Velocity and
Viking®.

Recreational vehicles are either
driven or towed and serve as temporary living quarters for camping, travel and other
leisure activities. Recreational vehicles manufactured by the Company may be categorized
as motorhomes, travel trailers or camping trailers. A motorhome is a self-powered mobile
dwelling built on a special heavy-duty motor vehicle chassis. A travel trailer is a
non-motorized mobile dwelling designed to be towed behind another vehicle. Camping
trailers are smaller towed units constructed with sidewalls that may be raised up and
folded out.

The RV group currently produces
recreational vehicles on an assembly line basis in Indiana, Michigan, and Georgia.
Components used in the manufacturing of recreational vehicles are primarily purchased from
outside sources. However, in some cases (such as thermoformed plastic products) where it
is profitable for the RV group to do so, or where it has experienced shortages of
supplies, the RV group has undertaken to manufacture its own components. The RV group
depends on the availability of chassis from a limited number of manufacturers.
Occasionally, chassis availability has limited the groups production (see Note 12 of
Notes to Consolidated Financial Statements for information concerning the use of converter
pool agreements to purchase vehicle chassis).

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Prodesign, LLC, located in Indiana,
is a custom manufacturer of diversified thermoformed products for the automotive, marine,
recreational vehicle, medical and heavy truck industries.

In January 2004, the Company entered
into a long-term exclusive licensing agreement with The Coleman Company, Inc. to design,
produce and market a full line of new Coleman® brand recreational vehicles. In
November 2004, the judge presiding over the legal dispute between Fleetwood Enterprises,
Inc. and The Coleman Company, Inc. entered an order granting Fleetwoods request for
an injunction against Coleman, prohibiting their use of the trademark registration
Coleman in the recreational vehicle industry. To protect its rights under its
existing license agreement with Coleman, Consolidated Leisure Industries, LLC, doing
business as the Coachmen RV Group, has filed suit against The Coleman Company, Inc. in
federal court in Kansas City, Kansas, to enforce its rights under the license agreement.
Until this matter is finally and completely adjudicated, Coachmen will introduce and market
the new products under a different name, through
an independent body of dealers. The new Camping Trailer and Travel Trailer lines, which
were to be launched under the Coleman brand, were introduced to dealers in the
fourth quarter of 2004.

On December 31, 2004, the Company
sold all operating assets of the Company-owned dealership located in North Carolina. The
total sale price was $11.8 million, of which the Company received cash of $10.8 and a
promissory note of $1 million. The promissory note is due in two annual payments,
including interest. The sale resulted in a gain on sale of discontinued operations of $1.7
million, net of $.8 million in taxes. In accordance with Statement of Financial Accounting
Standard No. 144, the dealership qualified as a separate component of the Companys
business and as a result, the operating results and the gain on the sale of assets have
been accounted for as a discontinued operation. Previously reported financial results for
all periods presented have been restated to reflect this business as a discontinued
operation.

RV Segment Marketing

Recreational vehicles are generally
manufactured against orders received from RV dealers, who are responsible for the retail
sale of the product. These products are marketed through approximately 670 independent
dealers located in 48 states and internationally and through the Company-owned dealership.
Subject to applicable laws, agreements with most of its dealers are cancelable on short
notice, provide for minimum inventory levels and establish sales territories. No dealer or
dealer network accounts for 10% or more of the Companys consolidated net sales.

The RV group considers itself
customer driven. Representatives from sales and service regularly visit dealers in their
regions, and respond to questions and suggestions. Divisions host dealer advisory groups
and conduct informative dealer seminars and specialized training classes in areas such as
sales and service. Open forum meetings with owners are held at campouts, providing ongoing
focus group feedback for product improvements. Engineers and product development team
members are encouraged to travel and vacation in Company recreational vehicles to gain a
complete understanding and appreciation for the products.

As a result of these efforts, the RV
group believes it has the ability to respond promptly to changes in market conditions.
Most of the manufacturing facilities can be changed over to the assembly of other existing
products in two to six weeks. In addition, these facilities may be used for other types of
light manufacturing or assembly operations. This flexibility enables the RV group to
adjust its manufacturing capabilities in response to changes in demand for its products.

Most dealers purchases of
RVs from the RV group are financed through floor plan arrangements.
Under these arrangements, a bank or other financial institution agrees to lend the dealer
all or most of the purchase price of its recreational vehicle inventory, collateralized by
a lien on such inventory. The RV group generally executes repurchase agreements at the
request of the financing institution. These agreements typically provide that, for up to
twelve months after a unit is financed, the Company will repurchase a unit that has been
repossessed by the financing institution for the amount
then due to the financing institution. This is usually less than 100% of the dealers
cost. Risk of loss resulting from these agreements is spread over the Companys
numerous dealers and is further reduced by the resale value of the products repurchased
(see Note 12 of Notes to Consolidated Financial Statements). Resulting mainly from
periodic business conditions negatively affecting the recreational vehicle industry, the
Company has previously experienced some losses under repurchase agreements. Accordingly,
the

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Company has recorded an accrual for estimated losses under repurchase agreements. In
addition, at December 31, 2004, the group was contingently liable under guarantees to
financial institutions of their loans to independent dealers for amounts totaling
approximately $19.2 million, an increase of approximately $14.6 million from the $4.6
million in guarantees at December 31, 2003. The RV group does not finance retail consumer
purchases of its products, nor does it generally guarantee consumer financing.

RV Segment Business
Factors

Many recreational vehicles produced
by the RV group require gasoline or diesel fuel for their operation. Gasoline and diesel
fuel has, at various times in the past, been difficult to obtain, and there can be no
assurance that the supply of gasoline and diesel fuel will continue uninterrupted, that
rationing will not be imposed or that the price of, or tax on, fuel will not significantly
increase in the future. Shortages of gasoline or diesel fuel and significant increases in
fuel prices have had a substantial adverse effect on the demand for recreational vehicles
in the past and could have a material adverse effect on demand in the future.

Recreational vehicle businesses are
dependent upon the availability and terms of financing used by dealers and retail
purchasers. Consequently, increases in interest rates and the tightening of credit through
governmental action, economic conditions or other causes have adversely affected
recreational vehicle sales in the past and could do so in the future.

Recreational vehicles are high-cost
discretionary consumer durables. In the past, recreational vehicle sales have fluctuated
in a generally direct relationship to overall consumer confidence and economic prosperity.

RV Segment Competition
and Regulation

The RV industry is highly
competitive, and the RV group has numerous competitors and potential competitors in each
of its classes of products, some of which have greater financial and other resources than
the Company. Initial capital requirements for entry into the manufacture of recreational
vehicles, particularly towables, are comparatively small; however, codes, standards, and
safety requirements enacted in recent years may act as deterrents to potential
competitors.

The RV groups recreational
vehicles generally compete at all price points except the ultra high-end. The RV group
strives to be a quality and value leader in the RV industry. The RV group emphasizes a
quality product and a strong commitment to competitive pricing in the markets it serves.
The RV group estimates that its current overall share of the recreational vehicle market
is approximately six percent, on a unit basis.

The recreational vehicle industry is
fairly heavily regulated. The National Highway Traffic Safety Administration (NHTSA), the
Transportation Recall Enhancement, Accountability, and Documentation Act (TREAD), state
lemon law statutes, laws regulating the operation of vehicles on highways, state and
federal product warranty statutes and state legislation protecting motor vehicle
dealerships all impact the way the RV group conducts its recreational vehicle business.

State and federal environmental laws
also impact both the production and operation of the Companys products. The Company
has an Environmental Department dedicated to efforts to comply with applicable
environmental regulations. To date, the RV group has not experienced any material adverse
effect from existing federal, state, or local environmental regulations. Elkhart County,
which is where most of the recreational vehicle manufacturing facilities of the Company
are located, was recently designated as a non-attainment area, which could impact future
air emissions permitting.

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Housing and Building
Segment

Housing and Building Segment
Products

The Housing and Building Segment
consists of residential and commercial buildings. The Companys housing and building
subsidiaries (the All American Homes group, All American Building Systems, LLC, Mod-U-Kraf
Homes, LLC and Miller Building Systems, Inc.) produce system-built modules for
single-family residences, multi-family duplexes, apartments, condominiums, hotels and
specialized structures for municipal and commercial use.

All American Homes and Mod-U-Kraf
design, manufacture and market system-built housing and commercial structures. All
American Homes is the largest producer of system-built homes in the United States and has
seven operations strategically located in Colorado, Indiana, Iowa, Kansas, North Carolina,
Ohio and Tennessee. Mod-U-Kraf operates from a plant in Virginia. Together these plants
serve approximately 527 independent builders in 35 states and three Company-owned builders
located in Indiana, Tennessee and Kansas. System-built homes are built to the same local
building codes as site-built homes by skilled craftsmen in a factory environment
unaffected by weather conditions during production. Production takes place on an assembly
line, with components moving from workstation to workstation for framing, electrical,
plumbing, drywall, roofing, and cabinet setting, among other operations. An average
two-module home can be produced in just a few days. As nearly completed homes when they
leave the plant, home modules are delivered to their final locations, typically in two to
seven sections, and are crane set onto a waiting basement or crawl space foundation.

Miller Building Systems, Inc.
(Miller Building) designs, manufactures and markets system-built buildings for
commercial use such as office buildings, permanent housing, temporary housing, classrooms,
telecommunication shelters and other forms of shelter. Miller Building specializes in the
education and medical fields with its commercial system-built buildings. It is also a
major supplier of shelters to house sophisticated telecommunications equipment for
cellular and digital telephones, data transmission systems and two-way wireless
communications. Miller Building also offers site construction services, which range from
site management to full turnkey operations. Depending on the specific requirements of its
customers, Miller Building uses wood, wood and steel, concrete and steel, cam-lock panels
or all concrete to fabricate its structures. Miller Building manufactures its buildings in
a factory, and the assembled modules are delivered to the site location for final
installation. Miller Building has manufacturing facilities located in Indiana and
Pennsylvania.

Housing and Building Segment Marketing

The Housing and Building group
participates in an expanding market for system-built residential and commercial buildings.
Housing is marketed directly to approximately 527 builders in 35 states who will sell,
rent or lease the buildings to the end-user. Commercial buildings are marketed to
approximately 100 companies in 36 states. Customers may be national, regional or local in
nature.

The housing group regularly conducts
builder meetings to review the latest in new design options and component upgrades. These
meetings provide an opportunity for valuable builder input and suggestions at the planning
stage. The system-built homes business is currently concentrated in the rural, scattered
lot markets in the geographic regions served. The Company has launched initiatives to
supply product into additional markets, including residential subdivisions in lower tier
metropolitan areas, group living facilities, motels/hotels, professional office buildings
and other commercial structures.

The success of system-built buildings
in the commercial market is the result of innovative designs that are created by listening
to customer needs and taking advantage of advancements in technology. While price is often
a key factor in the purchase decision, other factors may also apply, including delivery
time, quality and prior experience with a certain manufacturer. A significant benefit to
the customer is the speed with which system-built buildings can be made available for use
compared to on-site construction, and, in the commercial area, the ability to relocate the
building to another location if the end-users utilization requirements change. The
sales staff calls on prospective customers in addition to maintaining continuing contact
with existing customers and assists its customers in developing building specifications to
facilitate the preparation of a quotation. The sales staff, in conjunction with the
engineering staff, maintains ongoing contact with the customer for the duration of the
building project.

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To further develop its initiatives to
expand into additional markets, in 2003 the Company formed a new subsidiary called All
American Building Systems, LLC. This subsidiary has integrated direct sales and marketing
for both the All American Homes facilities and the Miller Building Systems facilities.
This new entity is responsible for identifying new markets for the Companys products
through channels other than the traditional builder/dealer network.

Housing and Building Segment Business Factors

As a result of transportation costs,
the effective distribution range of system-built homes and commercial buildings is
limited. The shipping area from each manufacturing facility is typically 200 to 300 miles
for system-built homes and 600 miles for commercial buildings. The potential shipping
radius of the telecommunication shelters is not as restricted as that of system-built
homes and commercial buildings; however, the marketing of these shelters is concentrated
in geographic areas where there is a freight advantage over a large portion of
competitors.

The overall strength of the economy
and the availability and terms of financing used by builders, dealers and end-users have a
direct impact on the sales of the Housing and Building group. Consequently, increases in
interest rates and the tightening of credit due to government action, economic conditions
or other causes have adversely affected the groups sales in the past and could do so
in the future.

Housing and Building
Segment Competition and Regulation

Competition in the system-built
building industry is intense and the Housing and Building group competes with a number of
entities, some of which may have greater financial and other resources than the Company.
The demand for system-built homes may be impacted by the ultimate purchasers
acceptance of system-built homes as an alternative to site-built homes. To the extent that
system-built buildings become more widely accepted as an alternative to conventional
on-site construction, competition from local contractors and manufacturers of other
pre-engineered building systems may increase. In addition to the competition from
companies designing and constructing on-site buildings, the Housing and Building group
competes with numerous system-built building manufacturers that operate in particular
geographical regions.

The Housing and Building group
competes for orders from its customers primarily on the basis of quality, timely delivery,
engineering capability, reliability and price. The group believes that the principal basis
on which it competes with on-site construction is the combination of: the timeliness of
factory versus on-site construction, the cost of its products relative to on-site
construction, the quality and appearance of its buildings, its ability to design and
engineer buildings to meet unique customer requirements, and reliability in terms of
completion time. Manufacturing efficiencies, quantity purchasing and generally lower wage
rates of factory construction, even with the added transportation expense, result in the
cost of system-built buildings being equal to or lower than the cost of on-site
construction of comparable quality. With manufacturing facilities strategically located
throughout the country, the Housing and Building group provides a streamlined construction
process. This process of manufacturing the building modules in a weather-free, controlled
environment, while the builder prepares the site, significantly reduces the time to
completion on a customers project.

Customers of the Housing and Building
group are generally required to obtain building installation permits from applicable
governmental agencies. Buildings completed by the group are manufactured and installed in
accordance with applicable building codes set forth by the particular state or local
regulatory agencies.

State building code regulations
applicable to system-built buildings vary from state to state. Many states have adopted
codes that apply to the design and manufacture of system-built buildings, even if the
buildings are manufactured outside the state and delivered to a site within that
states boundaries. Generally, obtaining state approvals is the responsibility of the
manufacturer. Some states require certain customers to be licensed in order to sell or
lease system-built buildings. Additionally, certain states require a contractors
license from customers for the construction of the foundation, building installation, and
other on-site work. On occasion, the Housing and Building group has experienced regulatory
delays in obtaining the various required building plan approvals. In addition to some of
its customers, the group actively seeks assistance from various regulatory agencies in
order to facilitate the approval process and reduce the regulatory delays.

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General(Applicable to all of
the Companys principal markets)

Business Segments

The table below sets forth the
composition of the Companys net sales from continuing operations for each of the
last three years (dollar amounts in millions):

`2004            2003            2002
                               Amount   %      Amount   %      Amount   %
                               ----------      ----------      ----------

 Recreational Vehicles        $606.2   70.1   $475.4   68.1   $421.4   64.7

 Housing and Buildings         258.9   29.9    223.0   31.9    229.6   35.3
                              ------   ----   ------   ----   ------   ----

     Total                    $865.1  100.0   $698.4  100.0   $651.0  100.0
                              ======  =====   ======  =====   ======  =====`

Additional information concerning
business segments is included in Note 2 of the Notes to Consolidated Financial Statements.

Seasonality

Historically, the Company has
experienced greater sales during the second and third quarters with lesser sales during
the first and fourth quarters. This reflects the seasonality of RV sales for products used
during the summer camping season and also the adverse impact of weather on general
construction for the system-built building applications.

Employees

At December 31, 2004, Coachmen
employed 4,416 persons, 993 of whom are salaried and involved in operations, engineering,
purchasing, manufacturing, service and warranty, sales, distribution, marketing, human
resources, accounting and administration. The Company provides group life, dental, vision
services, hospitalization, and major medical plans under which the employee pays a portion
of the cost. In addition, employees can participate in a 401(k) plan and a stock purchase
plan. Certain employees can participate in a stock option plan and in deferred and
supplemental deferred compensation plans (see Notes 8 and 9 of Notes to Consolidated
Financial Statements). The Company considers its relations with employees to be good.

Research and Development

During 2004, the Company spent
approximately $8.0 million on research related to the development of new products and
improvement of existing products. The amounts spent in 2003 and 2002 were approximately
$7.2 million and $6.4 million, respectively.

Item 2. Properties

The Registrant owns or leases
3,708,897 square feet of plant and office space, located on 1,156.1 acres, of which
3,150,993 square feet are used for manufacturing, 225,136 square feet are used for
warehousing and distribution, 46,024 square feet are used for research and development,
69,644 square feet are used for customer service and 217,100 square feet are offices.
Included in these numbers are 71,310 square feet leased to others and 115,210 square feet
available for sale or lease. The Registrant believes that its present facilities,
consisting primarily of steel clad, steel frame or wood frame construction and the
machinery and equipment contained therein, are well maintained and in good condition.

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The following table indicates the
location, number and size of the Registrants properties by segment as of December
31, 2004:

`No. of      Building Area
                  Location              Acreage    Buildings     (Sq. Ft.)
                  --------              -------    ---------     ---------

Properties Owned and Used by Registrant:

  Recreational Vehicle Group

     Elkhart, Indiana                     43.0       10         317,094
     Middlebury, Indiana                 525.0       29       1,143,443
     Fitzgerald, Georgia                  29.6        5         170,670
     Centreville, Michigan               105.0        4          84,865
     Edwardsburg, Michigan                83.1       12         303,254
                                       -------       --       ---------

          Subtotal                       785.7       60       2,019,326
                                       -------       --       ---------

  Housing and Building Group

     Decatur, Indiana                     40.0        2         215,995
     Elkhart, Indiana                     20.0        4         132,300
     Dyersville, Iowa                     20.0        1         168,277
     Leola, Pennsylvania                  20.0        2         113,100
     Springfield, Tennessee               45.0        2         140,603
     Rutherfordton, North Carolina        37.7        1         169,177
     Zanesville, Ohio                     23.0        2         139,753
     Rocky Mount, Virginia                39.6        5         137,693
     Osage City, Kansas                   29.2        3         130,818
     Wichita, Kansas                       3.0        0               0
     Milliken, Colorado                   23.0        1         141,675
                                       -------       --       ---------

          Subtotal                       300.5       23       1,489,391
                                       -------       --       ---------

          Total owned and used         1,086.2       83       3,508,717
                                       -------       --       ---------`

`Properties Leased and Used by Registrant:

  Recreational Vehicle Group


     Elkhart, Indiana                      6.6        1           8,000
     Chino, California                     1.0        3          84,296
                                       -------       --       ---------

          Subtotal                         7.6        4          92,296

  Housing and Building Group

     Vestal, New York                      0.0        1           5,660
                                       -------       --       ---------

          Total leased and used            7.6        5          97,956
                                       -------       --       ---------`

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`Properties Owned by Registrant and Leased to Others:

  Recreational Vehicle Group


     Crooksville, Ohio                    10.0        2          39,310
     Melbourne, Florida                    7.5        1          32,000
                                       -------       --       ---------

          Total owned and leased          17.5        3          71,310
                                       -------       --       ---------

Properties Owned by Registrant and Available for Sale or Lease:

  Recreational Vehicle Group

     Perris, California                    2.2        0               0
     Colfax, North Carolina                7.8        0               0
     Grapevine, Texas                      8.6        0               0
     Longview, Texas                       9.2        0               0
                                       -------       --       ---------
          Subtotal                        27.8        0               0
                                       -------       --       ---------

  Housing and Building Group


    Decatur, Indiana                       3.3        2          86,310
    Bennington, Vermont                    5.0        1          28,900
    Rocky Mount, Virginia                  9.7        0               0
                                       -------       --       ---------

          Subtotal                        18.0        3         115,210
                                       -------       --       ---------

          Total owned and available
            for sale or lease             45.8        3         115,210
                                       -------       --       ---------

          Total Company                1,157.1       94       3,793,193
                                       =======       ==       =========`

Item 3. Legal Proceedings

The Company is involved in various
legal proceedings, most of which are ordinary disputes incidental to the industry and most
of which are covered in whole or in part by insurance. Management believes that the
ultimate outcome of these matters and any liabilities in excess of insurance coverage and
self-insurance accruals will not have a material adverse impact on the Companys
consolidated financial position, future business operations or cash flows.

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

No matters were submitted during the
quarter ended December 31, 2004 to a vote of security holders, through the solicitation of
proxies or otherwise.

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Executive Officers of the
Registrant

The following table sets forth the
executive officers of the Company, as of December 31, 2004:

`Name                                    Position
       ----                                    --------

  Claire C. Skinner           Chairman of the Board and Chief Executive Officer

  Matthew J. Schafer          President and Chief Operating Officer

  Richard M. Lavers           Executive Vice President and General Counsel and Secretary

  Joseph P. Tomczak           Executive Vice President and Chief Financial Officer

  Michael R. Terlep, Jr.      President, CLI dba Coachmen RV Group and President,
                              Coachmen Recreational Vehicle Company, LLC

  Steven E. Kerr              President, All American Homes, LLC

  William G. Lenhart          Senior Vice President, Human Resources`

Claire C. Skinner (age 50) joined Coachmen Industries in 1983 and has served as Chairman of the Board
 and Chief Executive Officer since August 1997 while assuming the position
of President of the Company from
September 2000 through November 2003. Before that, she served as Vice Chairman of the
Company since May 1995, and as Executive Vice President from 1990 to 1995. From 1987
through July 1997, Ms. Skinner served as the President of Coachmen RV, the Companys
largest division. Prior to that, she held several management positions in operations and
marketing since 1983. She received her B.F.A. degree in Journalism/Marketing from Southern
Methodist University and her J.D. degree from the University of Notre Dame Law School.

Matthew J. Schafer (age 44) joined Coachmen Industries in December 2003 as President and Chief Operating Officer. Before joining
Coachmen, Mr. Schafer served for more
than 19 years in various executive positions with General Electric Company. From 2002 to
2003, he was Chief Operating Officer, GE Equipment Management, TIP & Modular Space, a
full-line leasing, sales and service company of trailers, modular space units, containers
and storage products. From 1999 to 2002, Schafer served as President, GE Equipment
Management, Modular Space North America, a leading leasing, sales, turnkey construction
and service business of modular units. From 1995 through 1998, he served as the General
Manager for three businesses of General Electric Industrial Systems, a global manufacturer
of AC/DC motors, controls, security equipment, and software for the HVAC, commercial,
appliance, and industrial markets. Schafer also held several other management positions
with General Electric from 1984 through 1994. Schafer holds a Bachelor of Science degree
in mechanical engineering from Union College in Schenectady, New York, and an Associates
of Science degree in engineering science from Hudson Valley College in Troy, New York.

Richard M. Lavers (age 57) joined
Coachmen Industries in October of 1997 as General Counsel and assumed the position of
Executive Vice President of the Company in May 2000 and has served as Secretary of the
Company since March 1999. From 1994 through 1977, Mr. Lavers was Vice President, Secretary
and General Counsel of RMT, Inc. and Heartland Environmental Holding Company. Mr. Lavers
earned both his B.A. degree and his J.D. degree from the University of Michigan.

Joseph P. Tomczak (age 49) joined
Coachmen Industries in July 2001 as Executive Vice President and Chief Financial Officer.
Before joining Coachmen, Mr. Tomczak served in that same capacity at Kevco, Inc. from
January 2000 through June 2001. In February 2001, Kevco and all of its wholly owned
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code. Prior to that, he held the positions at Outboard Marine Corporation of Vice President of Finance for the Engine
Operations Group and Vice President
and Corporate Controller. Prior to that, Mr. Tomczak was Vice President and Corporate
Controller at Alliant Foodservice, Inc. He received his Masters of Management degree from
Northwestern Universitys Kellogg Graduate School of Management and his B.A. degree
in Accounting and Business Administration from Augustana College. Mr. Tomczak is a
Certified Public Accountant.

10

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Michael R. Terlep, Jr. (age 43)
joined Coachmen Industries in 1984. Mr. Terlep was appointed President of CLI, dba
Coachmen RV Group in March 2003 and appointed President of Coachmen Recreational Vehicle
Company (RV) in June 1997. Prior to that, he was Executive Vice President of Coachmen RV,
with retained responsibility for product development, among other duties, since 1993. He
was given the additional responsibility of General Manager of the Indiana Division in
1995. Prior to his promotion to Executive Vice President, Mr. Terlep served as Vice
President of Sales and Product Development from 1990 to 1993. He has held several other
management positions with the Company since joining Coachmen in 1984. He received his B.A.
degree from Purdue University.

Steven E. Kerr(age 56) joined
Coachmen Industries in February 1999. He served as Vice President/General Manager of All
American Homes from February 1999 to July 2000, when he was appointed President of All
American Homes. Prior to joining the Company, Mr. Kerr served as Vice President, Marketing
of Unibilt Industries, Inc. Prior to that, he served as Vice President/General Manager of
New England Homes, Inc. Mr. Kerr received his B.A. degree from Indiana University.

William G. Lenhart (age 56) joined
Coachmen Industries in June 2001 as Senior Vice President of Human Resources. Prior to
that, he held the position of Vice President of Human Resources for Svedala Industries,
Inc., an international mining and mineral processing equipment manufacturing company.
Prior to that, he held senior human resources positions with Arandel Corporation and St.
Marys Medical Center. Mr. Lenhart holds a B.S. degree in Business Administration
from Defiance College.

11

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Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

The following table discloses the
high and low sales prices for Coachmens common stock during the past two years as
reported on the New York Stock Exchange, along with information on dividends paid per
share during the same periods.

`High & Low Sales Prices           Dividends Paid
                         2004               2003           2004      2003
                         ----               ----           ----      ----

   1st Quarter     $20.19 - $14.92    $16.54 - $10.00      $.06      $.06

   2nd Quarter      18.01 -  13.70     13.82 -  10.50       .06       .06

   3rd Quarter      16.54 -  13.22     14.30 -  11.45       .06       .06

   4th Quarter      17.99 -  13.70     19.20 -  11.96       .06       .06`

The Companys common stock is
traded on the New York Stock Exchange: Stock symbol COA. The number of shareholders of
record as of January 31, 2005 was 1,853.

See Item 12 for the
Equity Compensation Table.

12

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Item 6. Selected
Financial Data

Five-Year Summary of Selected Financial Data
                                            -Year Ended December 31-
(in thousands, except per share amounts)

`2004       2003        2002        2001        2000
                                ----       ----        ----        ----        ----

Net sales                    $865,144   $698,376    $651,028    $570,071    $712,796
Gross profit                  124,619    102,068      96,855      80,755      93,802
Net income (loss) from
   continuing operations       13,425      6,919       9,619      (4,291)      1,767
Discontinued operations
  Income from operations of
   discontinued entity            174        446         310         340         397
  Gain on sale of assets of
   discontinued entity          1,735          0           0           0           0
                             --------   --------    --------    --------   ---------
Income from discontinued
   operations                   1,909        446         310         340         397

Net income                   $ 15,334   $  7,365    $  9,929    $ (3,951)   $  2,164

Earnings per share - Basic
  Continuing operations           .87        .45         .60        (.27)        .11
  Discontinued operations         .12        .03         .02         .02         .03
                                  ---        ---         ---         ---         ---
Net earnings per share - Basic    .99        .48         .62        (.25)        .14

Earnings per share - Diluted
  Continuing operations           .87        .45         .60        (.27)        .11
  Discontinued operations         .12        .03         .02         .02         .03
                                  ---        ---         ---         ---         ---
Net earnings per share - Diluted  .99        .48         .62        (.25)        .14

Cash dividends per share          .24        .24         .22         .20         .20

At year-end:

   Working capital            121,312     95,963      93,574     102,006     116,237

   Total assets               357,723    310,688     293,195     288,560     296,446

   Long-term debt              14,943      9,419      10,097      11,001      11,795

   Shareholders' equity       224,418    211,151     209,426     208,640     214,949

   Book value per share         14.27      13.58       13.37       13.09       13.69

   Number of employees          4,416      4,490       4,233       3,788       4,149`

Note: The Five-Year Summary of
Selected Financial Data above has been restated to reflect discontinued operations and
should be read in conjunction with Note 11, Discontinued Operations, of the Notes to the
Consolidated Financial Statements appearing in this report.

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

The analysis of the Companys
financial condition and results of operations should be read in conjunction with the
Selected Financial Data and the Consolidated Financial Statements.

OVERVIEW

The Company was founded in 1964 as a
manufacturer of recreational vehicles and began manufacturing system-built homes in 1982.
Since that time, the Company has evolved into a leading manufacturer in both the
recreational vehicle (RV) and housing and building business segments through a
combination of internal growth and strategic acquisitions.

During 2003, the Company completed
construction of a new Class C motorhome manufacturing facility in Indiana and purchased an
existing facility in Georgia to expand its
manufacturing capacity for travel trailers and fifth

13

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wheels.  
          During 2004, the Company acquired two new RV production facilities five miles
          north of the main complex in Middlebury, Indiana and sold one smaller facility
          located in Goshen, Indiana. These new manufacturing facilities were acquired to
          meet increased market demand for the Companys travel trailers and fifth
          wheels and for production of the Companys new camping and travel trailer
          lines. In addition, the Company opened a new regional service center in Chino,
          California to better meet the needs of its recreational vehicle dealers and
          retail customers on the West Coast.

The Companys business segments
are cyclical and subject to certain seasonal demand cycles and changes in general economic
and political conditions. Demand in the RV and certain portions of the housing and
building segments generally declines during the winter season, while sales and profits are
generally highest during the spring and summer months. Inflation and changing prices have
had minimal direct impact on the Company in the past in that selling prices and material
costs have generally followed the rate of inflation. However, in 2004, rapid escalation of
prices for certain raw materials combined with a number of price protected sales contracts
adversely affected profits in the housing and building segment. The RV segment was also
affected adversely by raw material inflation but to a lesser degree due to material
surcharges added to the prices of products sold to dealers. Changes in interest rates
impact both the RV and housing and building segments, with rising interest rates
potentially dampening sales.

14

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RESULTS OF OPERATIONS

The following table sets forth, for
the periods indicated, the percentage of net sales represented by certain items reflected
in the Consolidated Statements of Income expressed as a percentage of sales and the
percentage change in the dollar amount of each such item from that in the indicated
previous year:

`Percentage of Net Sales      Percent Change
                                  Years Ended December 31       2004    2003
                                                                 to      to
                                  2004      2003      2002      2003    2002
                                  ----      ----      ----      ----    ----


Net sales                        100.0%    100.0%    100.0%     23.9%    7.3%
Cost of sales                     85.6      85.4      85.1      24.2     7.6
                                 -----     -----     -----
 Gross profit                14.4      14.6      14.9      22.1     5.4
Operating expenses:
 Delivery                          4.8       4.8       4.7      22.9    11.5
 Selling                           3.6       3.7       3.5      22.1    13.4
 General and administrative        4.0       4.7       4.8       5.2     4.2
 Gain on sale of properties, net   (.2)      (.1)      (.4)      n/m   (79.9)
                                 -----     -----     -----
   Total operating expenses       12.2      13.1      12.6      15.1    11.9
                                 -----     -----     -----
 Operating income                  2.2       1.5       2.3      83.5   (30.3)
                                 -----     -----     -----
Nonoperating (income) expense:
 Interest expense                   .3        .2        .3      65.1    (9.8)
 Investment income                 (.3)      (.1)      (.1)    129.1   125.5
  Other (income) expense           (.1)      (.1)      (.1)     10.0   (45.4)
                                 -----     -----     -----
   Total nonoperating
     (income) expense              (.1)       .0        .1       n/m   114.8
                                 -----     -----     -----
 Income from continuing
   operations before income taxes  2.3       1.5       2.2      88.0   (28.1)
 Income taxes                       .7        .5        .7      76.1   (28.2)
                                 -----     -----     -----
 Net income from continuing
   operations                      1.6       1.0       1.5      94.0   (28.1)
 Discontinued operations
  Income from operations of
   discontinued entity              .0        .1        .0     (61.0)   43.8
  Gain on sale of assets
   of discontinued entity           .2        .0        .0       n/m       0
                                 -----     -----     -----                 -
 Net income                        1.8       1.1       1.5     108.2   (25.8)
                                 =====     =====     =====`

n/m  not meaningful

Note: The Results of Operations above
has been restated to reflect discontinued operations and should be read in conjunction
with Note 11, Discontinued Operations, of the Notes to the Consolidated Financial
Statements appearing in this report.

Comparison of 2004 to 2003

Consolidated net sales from
continuing operations increased $166.8 million, or 23.9% to $865.1 million in 2004 from
$698.4 million in 2003. The Companys RV Segment experienced a net sales increase of
$130.9 million, or 27.5%, over 2003. During 2004, the Company continued to see a shift in
demand towards higher end products in the RV Segment. Full-year recreational vehicle
wholesale unit shipments for the Company were up 10.1% compared to 2003, while the
industry was up 15.5% in the same categories. In the various product categories, the
Companys Class A market share increased to 7.9% in 2004 as compared to 7.1% in 2003.
Class C market share increased to 12.5% compared to 11.6% in 2003. Travel trailer market
share declined 0.6 percentage points to 4.4% from 5.0% in 2003. Fifth wheel market share
decreased to 2.1% in 2004 from 3.1% in 2003 and camping trailer market share increased to
14.7% from 12.0% the previous year. The increase in Class A market share is attributable
to the improved performance of the Companys Georgie Boy subsidiary during 2004
coupled with the increased emphasis on rear diesel products at Coachmen Recreational
Vehicle Company. Travel trailer market share decreased mainly due to an increase of 11.3%
in unit shipments within the industry while the Companys unit shipments remained
flat for 2004. Likewise, the fifth wheel market share decline is a result of an increase
of 35.0%

15

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in unit shipments within the
industry, while the Companys unit shipments declined 11.2%. Camping trailers saw an
industry-wide decline in wholesale shipments of over 4% during 2004 while the Company
experienced a 16.9% increase in unit shipments. As a result of the overall lower increase
in unit shipments when compared to the industry, Coachmens share of recreational
vehicle wholesale shipments for the year declined to 5.8%, a 0.2 percentage point decline
from its 2003 full-year share of 6.0%. The 27.5% increase in sales dollars for the
Recreational Vehicle Segment coupled with a 10.1% increase in unit shipments resulted in
an increase of 15.9% in the average sales price per unit for products sold by the Company
in 2004. RV backlogs at the end of 2004 were $101 million. Although the backlog is down
approximately 35% from a year ago, the Company considers the current backlog to be at a
healthy level. The backlog at the end of 2003 was exceedingly high as a result of
improving market fundamentals at that time. The Housing and Building Segment had a net
sales increase in 2004 of $35.9 million, or 16.1%. Residential wholesale unit shipments
increased 8.6% compared with the prior year and backlogs at December 31, 2004 rose 23.7%
to $47 million, compared with $38 million at December 31, 2003. For 2004, the Housing and
Building Segment experienced a 5.0% increase in the average sales price per unit as well
as an overall 10.5% increase in unit sales. The increase was the result of product mix,
sales price increases and surcharges related to increased cost of raw materials,
particularly lumber. Historically, the Companys first and fourth quarters are the
slowest for sales in both segments.

Gross profit was $124.6 million, or
14.4% of net sales, in 2004 compared to $102.1 million, or 14.6% of net sales, in 2003.
For the RV Segment, gross profit in dollars and as a percentage improved in 2004. Gross
profit in dollars and as a percentage of net sales improved in 2004 for the RV Segment as
a result of increased production volume, resulting in improved utilization of the
Companys manufacturing facilities. For the Housing and Building Segment, gross
profit in dollars improved while the gross profit percentage declined slightly due to the
Companys continued investment in new business initiatives. The overall increase in
gross profit dollars was primarily attributable to the continued recovery of the RV
Segment while the decrease in gross profit as a percentage of sales was primarily the
result of material price increases in the Housing and Building Segment and new business
initiatives in both the RV and Housing and Building Segments.

Operating expenses, consisting of
selling, delivery, general and administrative expenses, were $107.3 million and $92.2
million, or as a percentage of net sales, 12.4% and 13.2% for 2004 and 2003, respectively.
Delivery expenses were $41.6 million in 2004 or 4.8% of net sales, compared with $33.8
million in 2003, or 4.8% of net sales. Product mix, delivery distance, as well as,
operating expenses and outsourcing costs affect delivery expense. Selling expenses for
2004 were $31.5 million, or 3.6% of net sales, a 0.1 percentage point decrease from the
$25.8 million, or 3.7% of net sales, experienced in 2003. The $5.7 million increase in
selling expense was the result of an increase of $3.7 million from the RV Segment which
was related to increased staffing, sales commissions and bonuses, along with increased
expenses associated with new product shows plus $2.0 million from the Housing and Building
Segment which was related to increased staffing, commissions, new product shows and
literature expenses. General and administrative expenses were $34.2 million in 2004, or
4.0% of net sales, compared with $32.5 million, or 4.7% of net sales, in 2003. The
increase, while less as a percentage of sales than 2003, was primarily related to
increases in management bonuses and regulatory compliance costs including professional
services related to the audit.

Operating income in 2004 of $19.1
million increased $8.7 million compared with the operating income of $10.4 million in
2003. This increase is consistent with the $22.6 million increase in gross profit coupled
with the $15.2 million overall increase in operating expenses and the $1.3 million
increase in gain on sale of properties.

The gain on sale of properties
increased to $1.8 million in 2004 from $.5 million in 2003. The gains for 2004 resulted
primarily from the sale of a 79,000 square foot facility in Goshen, Indiana and the sale
of various properties that had not been used in production, which were located in Elkhart
and Middlebury, Indiana. The gains for 2003 resulted primarily from the sale of vacant
lots located in California. Assets are continually analyzed and every effort is made to
sell or dispose of properties that are determined to be excess or unproductive.

Interest expense for 2004 and 2003
was $2.2 million and $1.3 million, respectively. Interest expense varies with the amount
of short-and long-term borrowings incurred by the Company and the amount borrowed by the
Company against the cash surrender value of the Companys investment in life
insurance contracts. During 2004, the Company borrowed from its line of credit ($10
million outstanding at December 31, 2004), obtained a one-time short-term note ($10
million outstanding at December 31, 2004) and borrowed against the cash surrender value of

16

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its
investment in life insurance contracts ($15 million outstanding at December 31, 2004) to
meet working capital needs. These borrowings were generally associated with the increased
inventory and accounts receivable levels maintained by the Company during 2004, along with
the investment in two strategic growth initiatives within the RV Segment during 2004 that
were funded primarily from available cash and borrowings. The first growth initiative was
the purchase, tooling and staffing of a business unit that was to have been dedicated to
the Coleman® brand of recreational vehicles. The second initiative was the opening of
the Companys new West Coast Service Center in southern California to better serve
customers in the western states.

Investment income for 2004 of $2.4
million was $1.4 million higher than 2003 (see Note 1 of Notes to Consolidated Financial
Statements).

Pretax income from continuing
operations for 2004 was $19.6 million compared with pretax income from continuing
operations of $10.4 million for 2003. The Companys RV Segment generated pretax
income from continuing operations of $11.6 million, or 1.9% of recreational vehicle net
sales in 2004, compared with pretax income from continuing operations of $3.8 million, or
..8% of the RV Segments net sales in 2003. The Housing and Building Segment recorded
2004 pretax income from continuing operations of $8.3 million and in 2003, $7.3 million,
or 3.2% and 3.3%, respectively, of segment net sales (see Note 2 of Notes to Consolidated
Financial Statements).

The provision for income taxes
related to continuing operations was an expense of $6.2 million for 2004 versus an expense
of $3.5 million for 2003, representing an effective tax rate of 31.6% for 2004 and 33.8%
for 2003. The lower effective tax rate in 2004 resulted primarily from the reversal of
certain reserves for federal income taxes which were no longer required since the statute
of limitations expired or the risk of additional tax assessments was no longer probable.
The Companys effective tax rate fluctuates based upon the states where sales occur,
the level of export sales, the mix of nontaxable investment income and changes in recorded
tax reserves (see Note 10 of Notes to Consolidated Financial Statements).

Net income from continuing operations
for the year ended December 31, 2004 was $13.4 million ($.87 per diluted share) compared
to net income from continuing operations for the year ended December 31, 2003 of $6.9
million ($.45 per diluted shared). Net income for the year ended December 31, 2004 was
$15.3 million ($.99 per diluted share) compared to net income of $7.4 million ($.48 per
diluted share) for 2003.

On December 31, 2004, the Company
sold all operating assets of the Company-owned dealership located in North Carolina. The
total sale price was $11.8 million, of which the Company received cash of $10.8 million
and a promissory note of $1 million. The promissory note is due in two annual payments,
including interest. The sale resulted in a gain on sale of discontinued operations of $1.7
million, net of $.8 million in taxes. In accordance with Statement of Financial Accounting
Standard No. 144, the dealership qualified as a separate component of the Companys
business and as a result, the operating results and the gain on the sale of assets have
been accounted for as a discontinued operation. Previously reported financial results for
all periods presented have been restated to reflect this business as a discontinued
operation.

Comparison of 2003 to 2002

Consolidated net sales increased
$47.3 million, or 7.3% to $698.3 million in 2003 from $651.0 million in 2002. After a slow
start at the beginning of 2003, hindered by the anticipation of war in Iraq, industry
trends improved, particularly in the RV Segment. The Companys RV Segment experienced
a net sales increase of $54.0 million, or 12.8%, over 2002. During 2003, the Company saw a
shift in demand towards higher end products in the RV segment resulting in a sales dollar
increase over 2002 while unit shipments declined. Full-year recreational vehicle wholesale
unit shipments for the Company were down 4.0% compared to 2002, while the industry was up
3.9% in the same categories. In the various product categories, the Companys Class A
market share increased to 7.1% in 2003 as compared to 6.6% in 2002. Class C market share
declined to 11.6% compared to 13.3% in 2002. Travel trailer market share declined 0.9
percentage points to 5.0% from 5.9% in 2002. Fifth wheel market share increased to 3.1% in
2003 from 2.4% in 2002 and camping trailer market share increased to 12.0% from 11.9% the
previous year. The increase in Class A market share is attributable to the improved
performance of the Companys Georgie Boy subsidiary during 2003 coupled with the
increased emphasis on rear diesel products at Coachmen Recreational

17

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Vehicle
Company. Travel trailer market share decreased mainly due to the lower volumes achieved
from Coachmen RVs Spirit of America entry-level trailer. Also, more of the
Companys towable business shifted to fifth wheels, with unit shipments increasing
34.8% as compared to 2002. Fifth wheel market share increased 29.2% as a result of several
successful new floor plan introductions during 2003. Camping trailers saw an industry-wide
decline in wholesale shipments of over 20% during 2003. The Company did slightly better,
resulting in a 0.1 percentage point market share gain. Because of this overall decrease in
unit shipments when compared to the industry, Coachmens share of recreational
vehicle wholesale shipments for the year declined to 6.0%, a 0.6 percentage point decline
from its 2002 full-year share of 6.6%. The 12.8% increase in sales dollars for the
Recreational Vehicle Segment coupled with a 4.0% decrease in unit shipments resulted in an
increase of 16.7% in the average sales price per unit for products sold by the Company in
2003. RV backlogs were a positive sign at the end of 2003, being 26.6% higher at the end
of 2003 as compared to the end of 2002. The Housing and Building Segment had a net sales
decrease in 2003 of $6.6 million, or 2.9%. Due to weather related problems, deliveries
were hampered throughout much of the year at several of the Companys locations, as
builders were unable to complete the foundations and site-preparations. As a result,
finished goods for the Housing and Building Segment were 23.9% higher at December 31, 2003
as compared to December 31, 2002. On a positive note, 2003 year-end residential backlogs
were 16.1% higher than year-end 2002. These products were delivered during the first
quarter of 2004. For 2003, the Housing and Building Segment experienced an increase in the
average sales price per unit but a decrease in unit sales. The increase was mainly the
result of sales price increases and surcharges related to increased cost of raw materials,
particularly lumber. Historically, the Companys first and fourth quarters are the
slowest for sales in both segments.

Gross profit was $102.1 million, or
14.6% of net sales, in 2003 compared to $96.9 million, or 14.9% of net sales, in 2002. For
the RV Segment, gross profit in dollars improved in 2003 while the gross profit percentage
declined slightly. Gross profit in dollars and as a percentage of net sales was negatively
affected in 2003 for the RV Segment as a result of major material shortages experienced
throughout the year, including ovens and ranges during the fourth quarter. Initial
startups at the Companys two new RV manufacturing facilities located in Indiana and
Georgia also affected production efficiencies. However, as production rates increased in
these new plants, efficiencies steadily improved. For the Housing and Building Segment,
gross profit in dollars and as a percentage of net sales improved slightly in 2003 when
compared to the previous year. The overall increase in gross profit dollars was primarily
attributable to the continued recovery of the RV Segment while the decrease in gross
profit as a percentage of sales was primarily the result of manufacturing inefficiencies
in the RV Segment previously discussed.

Operating expenses, consisting of
selling, delivery, general and administrative expenses, were $92.2 million and $84.3
million, or as a percentage of net sales, 13.2% and 13.0% for 2003 and 2002, respectively.
Delivery expenses were $33.8 million in 2003, or 4.8% of net sales, compared with $30.3
million, or 4.7% of net sales in 2002. Delivery expense is affected by product mix,
delivery distance as well as operating expenses and outsourcing costs. For 2003, delivery
expense increased $3.5 million as compared to 2002. However, revenue generated from
delivery, included in sales revenue, increased $4.9 million, more than offsetting the
increase in expenses for the year. Selling expenses for 2003 were $25.8 million, or 3.7%
of net sales, a 0.2 percentage point increase over the $22.8 million, or 3.5% of net
sales, experienced in 2002. The $3.0 million increase in selling expense came primarily
from the RV Segment and was related to increased sales staffing and travel-related
expenses along with increased expenses associated with new product shows. General and
administrative expenses were $32.5 million in 2003, or 4.7% of net sales, compared with
$31.2 million, or 4.8% of net sales, in 2002. The increase, while less as a percentage of
sales than 2002, was primarily related to increases in insurance costs and professional
services.

Operating income in 2003 of $10.4
million compared with operating income of $14.9 million in 2002, a decrease of $4.5
million. This decrease is consistent with the $5.2 million increase in gross profit
coupled with the $7.9 million overall increase in operating expenses coupled with the gain
on sale of properties which decreased to $.5 million in 2003 from $2.3 million in 2002.
The gains on sales of properties for 2003 resulted primarily from the sale of vacant lots
located in California. Assets are continually analyzed and every effort is made to sell or
dispose of properties that are determined to be excess or unproductive.

Interest expense for 2003 and 2002
was $1.3 million and $1.5 million, respectively. Interest expense varies with the amount
of short-and long-term borrowings incurred by the Company. The Company periodically
borrows from its line of credit to meet working capital needs, as indicated by the $5.0
million outstanding balance at December 31, 2003. These borrowings were generally
associated with the increased inventory levels maintained by the Company

18

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during
2003, along with the investment in two new manufacturing facilities during 2003 that were
funded primarily from available cash and marketable securities. Investment income for 2003
of $1.0 million was $.5 million higher than 2002 (see Note 1 of Notes to Consolidated
Financial Statements).

Pretax income from continuing
operations for 2003 was $10.4 million compared with pretax income from continuing
operations of $14.5 million for 2002. The Companys RV Segment generated pretax
income from continuing operations of $3.8 million, or 0.8% of recreational vehicle net
sales in 2003, compared with pretax income from continuing operations of $5.0 million, or
1.2% of the RV segments net sales in 2002. The Housing and Building Segment recorded
2003 pretax income of $7.3 million and in 2002, $9.9 million, or 3.3% and 4.3%,
respectively, of segment net sales (see Note 2 of Notes to Consolidated Financial
Statements).

The provision for income taxes was an
expense of $3.5 million for 2003 versus an expense of $4.9 million for 2002, representing
an effective tax rate of 33.8% for both periods. The Companys effective tax rate
fluctuates based upon the states where sales occur, the level of export sales, the mix of
nontaxable investment income and other factors (see Note 10 of Notes to Consolidated
Financial Statements).

Net income from continuing operations
for the year ended December 31, 2003 was $6.9 million ($0.45 per diluted share) compared
to net income from continuing operations for the year ended December 31, 2002 of $9.6
million ($0.60 per diluted share). Net income from discontinued operations for the year
ended December 31, 2003 was $0.4 million ($0.03 per diluted share) compared to net income
from discontinued operations for the year ended December 31, 2002 of $0.3 million ($0.02
per diluted share). Net income for the year ended December 31, 2003 was $7.4 million ($.48
per diluted share) compared to net income of $9.9 million ($.62 per diluted share) for
2002.

Liquidity and Capital
Resources

The Company generally relies on funds
from operations as its primary source of working capital and liquidity. In addition, the
Company maintains a $35 million unsecured line of credit to meet its seasonal working
capital needs (see Note 5 of Notes to Consolidated Financial Statements). This credit line
was utilized in 2004 and 2003 and there were $10.0 million and $5.0 million in outstanding
borrowings at December 31, 2004 and 2003, respectively. The credit line was not utilized
during 2002. In addition to the line of credit borrowings, on December 30, 2004, the
Company entered into an Amendment to the Credit Agreement. The amendment provides for a
one-time short-term loan to the Company of $10 million. This short-term loan bears
interest at the prime rate and is due and payable on February 28, 2005. At December 31,
2004, there was $10 million outstanding on this loan. During 2004, the Company also
borrowed against the cash surrender value of the Companys investment in life
insurance contracts. As of December 31, 2004, $15 million had been borrowed against the
cash surrender value of Company-owned life insurance contracts.

For 2002, the Companys
operating activities had been the principal source of cash flows. However, during 2003 and
2004, mainly as a result of increased inventories and receivables, offset somewhat by an
increase in trade payables, the Company generated a negative cash flow from operations.
Cash used in operations in 2004 was $22.3 million and $3.6 million in 2003 while cash
flows provided by operations were $13.1 million for 2002. For 2004, net income adjusted
for depreciation and a slight increase in trade payables were the significant factors in
generating cash flows, which were offset by increases in accounts receivables and
inventories. The increase in accounts receivable was primarily related to the 8.6%
increase in fourth quarter sales as compared to the previous year. For the year 2003, net
income, adjusted for depreciation, and an increase in trade payables, were the significant
factors in generating operating cash flows, which were offset by increases in trade
receivables and inventories. The increase in receivables was related to the 15.8% increase
in fourth quarter sales as compared to the previous year and particularly by the RV
Segments strong sales effort during the final two weeks of December. For the year
2002, net income, adjusted for depreciation, was a significant factor in generating
operating cash flows, offset by increases in trade receivables and inventories. The
increase in receivables was related to the 28.5% increase in fourth quarter sales volume.
The $35 million increase in inventory from 2003 was primarily related to increases in the
RV segment as a result of production of higher value units as compared to 2003 and
lower-than-expected RV sales during the fourth quarter. During the fourth quarter, the RV
Segment faced an industry-wide slowdown in retail activity, and resulting high dealer
inventories. In response to the level of inventory on hand, production levels were
adjusted in the fourth quarter and into 2005.

19

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Investing activities used cash of
$9.8 million in 2004 and provided cash of $3.4 million in 2003 and $4.8 million in 2002.
In 2004, the investment in the West Coast Service Center and in the business unit that was
to have been dedicated to the Coleman® brand of recreational vehicles represented
major uses of cash, which were offset in part by the sale of the property and equipment of
a company-owned dealership and certain other property and equipment. In 2003, the
investment in two additional manufacturing facilities for the RV Segment represented a
major use of cash. In 2002, the sale of property and equipment, including real estate held
for sale and rental properties provided cash flows of $10.0 million. The sale of
marketable securities, net of purchases, provided cash flows of $1.0 million, $4.9
million, and $0.4 million for 2004, 2003, and 2002, respectively. These proceeds were used
in part to fund the investment in the additional manufacturing facilities in 2004 and
2003. Capital expenditures in 2004 of $16.5 million consisted of the investment in the
West Coast Service Center and the business unit that was to have been dedicated to the
Coleman® brand of recreational vehicles, and investments in machinery and equipment
and transportation equipment for both the Recreational Vehicle Segment and the Housing and
Building Segment. Other than the two additional manufacturing facilities, capital
expenditures of $12.1 million during 2003 included a new service facility constructed at
the Company-owned dealership in North Carolina that was sold in December 2004 and
investments in machinery and equipment and transportation equipment for both the
Recreational Vehicle Segment and the Housing and Building Segment. Capital expenditures
during 2002 consisted mainly of completion of a new office building for Mod-U-Kraf Homes
and investments in machinery and equipment and transportation equipment for both operating
segments.

In 2004, financing activities
provided cash flows of $40.7 million. Proceeds from borrowings on the line of credit,
including the short-term loan, borrowings on the cash surrender value of life insurance
polices and proceeds from long-term debt, net of repayments, provided cash of $43.7
million. Offsetting the cash provided by borrowings in 2004 was the payment of cash
dividends. In 2003, cash flows from financing activities reflected the Companys
short-term borrowing activity. The principal use of cash flows from financing activities
was $4.4 million used to purchase common shares under the Companys share repurchase
program during the first quarter. In 2002, the principal use of cash flows from financing
activities was the $18.5 million used to repay borrowings against life insurance policies,
and $7.9 million used to purchase common shares under the Companys share repurchase
program. Other financing activities for 2003 and 2002, were payments of long-term debt and
cash dividends. The negative cash flows for 2003 and 2002 were partially offset by the
issuance of common shares under stock option and stock purchase plans. For a more detailed
analysis of the Companys cash flows for each of the last three years, see the
Consolidated Statements of Cash Flows.

The Companys cash and temporary
cash investments at December 31, 2004 were $15 million or an increase of $8.6 million from
2003. The Company anticipates that available funds, together with anticipated cash flows
generated from future operations and amounts available under its existing credit
facilities, will be sufficient to fund future planned capital expenditures and other
operating cash requirements through the end of 2005. In addition, the Company has $1.7
million of marketable securities available, if needed, for operations.

Any downturn in the U.S. economy,
decline in consumer confidence and other factors may adversely impact the RV industry.
This may have a negative impact on the Companys sales of recreational vehicles and
also increases the Companys risk of loss under repurchase agreements with lenders to
the Companys independent dealers (see Note 12 of Notes to Consolidated Financial
Statements and Critical Accounting Policies below).

In 2004, working capital increased
$25.3 million, to $121.3 million from $96.0 million. The $53.7 million increase in current
assets at December 31, 2004 versus December 31, 2003 was primarily due to increases in
trade receivables and inventories. The $28.4 million increase in current liabilities is
substantially due to increases in trade payables, accrued expenses and other liabilities
and short-term borrowings.

The Company anticipates capital
expenditures in 2005 of approximately $13 million. The major planned expenditures include
a plant expansion at one of the housing manufacturing facilities to provide increased
capacity. The balance of the planned capital expenditures for 2005 will be for purchase or
replacement of machinery and equipment and transportation equipment to be used in the
ordinary course of business. The Company plans to finance these expenditures with funds
generated from operating cash flows.

20

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Principal Contractual
Obligations and Commercial Commitments

The Companys future contractual
obligations for agreements with initial terms greater than one year are summarized as
follows (in thousands):

`Payment Period
                                          --------------

                    2005      2006      2007      2008      2009   Thereafter
                    ----      ----      ----      ----      ----   ----------

Credit facility
  borrowings     $10,000.0  $   -     $   -     $   -     $   -     $   -
Long-term debt     2,194.7   2,145.0   2,510.6   2,212.1   5,650.1   2,425.7
Operating leases     831.0     797.2     708.2     525.1     521.0     968.9`

The Companys commercial
commitments, along with the expected expiration period of the commitment, is summarized as
follows (in thousands):

`Amount of Commitment
                                                Expiration Per Period
                                   Total        ---------------------
                                  Amounts      Less Than   In Excess of
                                 Committed      One Year     One Year
                                 ---------      --------     --------
Letters of credit               $  2,950.0    $  2,950.0    $   -
Guarantees                        21,488.9      19,239.7      2,249.2
Standby repurchase obligations   302,094.6     297,586.3      4,508.3
Chassis pool obligations          29,669.0      29,669.0        -
Financing obligation               3,200.0       3,200.0        -`

Critical Accounting
Policies

The following discussion of
accounting policies is intended to supplement the summary of significant accounting
policies presented in Note 1 of Notes to Consolidated Financial Statements. These policies
were selected because they are broadly applicable within our operating units and they
involve additional management judgment due to the sensitivity of the methods, assumptions
and estimates necessary in determining the related income statement, asset and/or
liability amounts.

Investments  The Company
regularly reviews its investment portfolio for any unrealized losses that would be deemed
other-than-temporary and require the recognition of an impairment loss in earnings. The
Company recognizes other-than-temporary losses for investments when cost has exceeded fair
market value for nine or more months. At December 31, 2004 and 2003, there were unrealized
losses of $355,500 and $457,800, respectively, that were considered other-than-temporary.

Impairment of Goodwill 
Indefinite-Lived Intangibles The Company evaluates the carrying amounts of goodwill
and indefinite-lived intangible assets annually to determine if they may be impaired. If
the carrying amounts of the assets are not recoverable based upon discounted cash flow
analysis, they are reduced by the estimated shortfall of fair value compared to the
recorded value. The Company completed the annually required valuation process and no
impairment losses were recognized in 2004. However, should actual results or changes in
future expectations differ from those projected by management, goodwill impairment may be
required and may be material.

Warranty Reserves The Company
provides customers of its products with a warranty covering defects in material or
workmanship for periods generally ranging from one to two years in length and up to ten
years on certain structural components. The Company records a liability based on its
estimate of the amounts necessary to settle future and existing claims on products sold as
of the balance sheet date. Estimated costs related to product warranty are accrued at the
time of sale and included in cost of sales. Average per unit costs are estimated based
upon past warranty claims and unit sales history and adjusted as required to reflect
actual costs incurred, as information becomes available. Warranty expense totaled $22.2
million, $16.5 million and $16.6 million in 2004,

21

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2003 and 2002, respectively. Accrued
liabilities for warranty expense at December 31, 2004 and 2003 were $10.1 million and $8.7
million, respectively.

Litigation and Product Liability
Reserves  At December 31, 2004 the Company had reserves for certain other loss
exposures, such as product liability ($2.9 million) and litigation ($0.5 million) (see
Note 12 of Notes to Consolidated Financial Statements). The Companys litigation
reserve is determined based on an individual case evaluation process. The Companys
estimated loss reserves for product liability are determined using loss triangles
established by the Companys management reflecting historical claims incurred by the
Company. While the Company believes this method to be consistent and appropriate, changes
in estimates based on historical trends could materially affect the Companys
recorded liabilities for loss.

New and Pending
Accounting Policies

(See New Accounting Pronouncements in
Note 1 of Notes to Consolidated Financial Statements.)

Forward-Looking Statements

This Annual Report contains certain
statements that are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements are based on managements expectations
and beliefs concerning future events. Forward-looking statements are necessarily subject
to risks and uncertainties, and are dependent on various factors, many of which are
outside the control of the Company. These uncertainties and other factors include, but are
not limited to, the potential fluctuations in the Companys operating results; the
availability for floor plan financing for the Companys recreational vehicle dealers
and corresponding availability of cash to the Company; the condition of the
telecommunications industry which purchases system-built structures; the impact of
performance on the valuation of intangible assets; the availability and price of gasoline
and diesel fuel, which can impact the sale of recreational vehicles; the Companys
dependence on chassis and appliance suppliers, which are used in the production of many of
the Companys recreational vehicle products; interest rates, which affect the
affordability of the Companys products; the availability and cost of real estate for
residential housing; the ability of the Housing and Building Segment to perform in new
market segments where it has limited experience; potential liabilities under repurchase
agreements and guarantees; changing government regulations, such as those covering
accounting standards; environmental matters or product warranties and recalls, which may
affect costs of operations, revenues, product acceptance and profitability; legislation
governing the relationships of the Company with its recreational vehicle dealers, which
may affect the Companys options and liabilities in the event of a general economic
downturn; the impact of consumer confidence and economic uncertainty on high-cost
discretionary product purchases, which can hinder the sales of recreational vehicles; the
demand for commercial structures in the various industries that the Housing and Building
Segment serves; uncertainties related to the launch of a new brand product line of
recreational vehicles; consolidation of distribution channels in the recreational vehicle
industry; and also on the state of the recreational vehicle and housing industries in the
United States. Other factors affecting forward-looking statements include the cyclical and
seasonal nature of the Companys businesses, uncertainties related to the launch of a
new brand product line of recreational vehicles and regarding the Coleman trademark
license for recreational vehicles, consolidation of distribution channels in the
recreational vehicle industry, adverse weather conditions affecting home deliveries,
changes in property taxes and energy costs, changes in federal income tax laws and federal
mortgage financing programs, changes in public policy, competition in these industries,
the Companys ability to maintain or increase gross margins which are critical to
profitability whether there are or are not increased sales, further developments in the
war on terrorism and related international crises, oil supplies and other risks and
uncertainties. In addition, investors should be aware that generally accepted accounting
principles prescribe when a company must disclose or reserve for particular risks,
including litigation exposure. Accordingly, results for a given reporting period could be
significantly affected if and when a reserve is established for a major contingency.
Reported results may therefore appear to be volatile in certain accounting periods. The
foregoing lists are not exhaustive, and the Company disclaims any obligation to
subsequently revise any forward-looking statements to reflect events or circumstances
after the date of such statements.

At times, the Companys actual
performance differs materially from its projections and estimates regarding the economy,
the recreational vehicle and building industries and other key performance indicators.
Readers of this Report are cautioned that reliance on any forward-looking statements
involves risks and uncertainties. Although the

22

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Company believes that the assumptions on
which the forward-looking statements contained herein are reasonable, any of those
assumptions could prove to be inaccurate given the inherent uncertainties as to the
occurrence or nonoccurrence of future events. There
can be no assurance that the forward-looking statements contained in this Report will
prove to be accurate. The inclusion of a forward-looking statement herein should not be
regarded as a representation by the Company that the Companys objectives will be
achieved.

Item 7A. Quantitative and
Qualitative Disclosures About Market Risk

In the normal course of business,
operations of the Company are exposed to fluctuations in interest rates. These
fluctuations can vary the costs of financing and investing yields. Throughout 2004, the
Company utilized its revolving credit facility to meet short-term working capital needs.
The Company had $10 million outstanding against the revolving credit facility on December
31, 2004. In addition, on December 30, 2004, the Company entered into an Amendment to the
Credit Agreement. The December amendment provided for a one-time short-term loan to the
Company of $10 million. At December 31, 2004, there was $10 million outstanding on this
loan. In 2003, the Company periodically utilized its credit facility to meet short-term
working capital needs and these borrowings were typically repaid in the near-term. The
Company had borrowings of $5.0 million outstanding against its credit facility at December
31, 2003. The Company did not utilize its credit facility in 2002. Accordingly, changes in
interest rates would impact both the Companys short and long-term debt. At December
31, 2004, the Company had $17.1 million of long-term debt, including current maturities.
Long-term debt consists mainly of industrial development revenue bonds of approximately
$9.2 million and $7.2 million outstanding related to a term loan. In January of 2003, the
Company entered into various interest rate swap agreements that became effective beginning
in October of 2003. These swap agreements, which are designated as cash flow hedges for
accounting purposes, effectively convert a portion of the Companys variable-rate
borrowings to a fixed-rate basis through November of 2011, thus reducing the impact of
changes in interest rates on future interest expense. The fair value of the Companys
interest rate swap agreements represents the estimated receipts or payments that would be
made to terminate the agreements. A cumulative loss of $96,000, net of taxes, attributable
to changes in the fair value of interest rate swap agreements was recorded as a component
of accumulated other comprehensive income (loss) as of December 31, 2004. If in the future
the interest rate swap agreements were determined to be ineffective or were terminated
before the contractual termination dates, or if it became probable that the hedged
variable cash flows associated with the variable-rate borrowings would stop, the Company
would be required to reclassify into earnings all or a portion of the unrealized losses on
cash flow hedges included in accumulated other comprehensive income (loss). At December
31, 2004, the Company had four interest rate swap agreements with notional amounts of $1.8
million, $350,000, $3.4 million, and $2.0 million, respectively, that were used to convert
the variable interest rates on certain industrial development revenue bonds to fixed
rates. In accordance with the terms of the swap agreements, the Company pays 3.39%, 3.12%,
3.71%, and 3.36% interest rates, respectively, and receives the Bond Market Association
Index (BMA), calculated on the notional amounts, with net receipts or payments being
recognized as adjustments to interest expense.

At December 31, 2004, the Company had
$1.7 million invested in marketable securities. The Companys marketable securities
consist of public utility preferred stocks which typically pay quarterly fixed rate
dividends. These financial instruments are subject to market risk in that available energy
supplies and changes in available interest rates would impact the market value of the
preferred stocks. As discussed in Note 1 of Notes to Consolidated Financial Statements,
the Company utilizes U.S. Treasury bond futures options as a protection against the impact
of increases in interest rates on the fair value of the Companys investments in
these fixed rate preferred stocks. Outstanding options are marked to market with market
value changes recognized in current earnings. The U.S. Treasury bond futures options
generally have terms ranging from 90 to 180 days. Based on the Companys overall
interest rate exposure at December 31, 2004, including variable or floating rate debt and
derivatives used to hedge the fair value of fixed rate preferred stocks, a hypothetical 10
percent change in interest rates applied to the fair value of the financial instruments as
of December 31, 2004, would have no material impact on earnings, cash flows or fair values
of interest rate risk-sensitive instruments over a one-year period.

23

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Item 8. Financial
Statements and Supplementary Data

|Index to Financial Statements                                                                                                                           | Page 
|------------------------------------------------------------------------------------------------------------------------------------------------------- | -----
|Financial Statements:      Report of Independent Registered Public Accounting Firm                                                                      | 25   
|Report of Independent Registered Public Accounting Firm on
           Internal Control over Financial Reporting                                         | 26   
|Consolidated Balance Sheets at December 31, 2004 and 2003                                                                                               | 28   
|Consolidated Statements of Income
          for the years ended December 31, 2004, 2003 and 2002                                                        | 29   
|Consolidated Statements of Income
          for the years ended December 31, 2004, 2003 and 2002                                                        | 30   
|Consolidated Statements of Cash Flows for the years
          ended December 31, 2004, 2003 and 2002                                                    | 31-32
|Notes to Consolidated Financial Statements                                                                                                              | 33-57
|Financial Statement Schedule:
          II - Valuation and Qualifying Accounts for the years
                    ended December 31, 2004, 2003 and 2002 | 61   

All other schedules are omitted
because they are not applicable or the required information is shown in the financial
statements or notes thereto.

24

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Report of Independent
Registered Public Accounting Firm

Board of Directors and
ShareholdersCoachmen Industries, Inc.

We have audited the accompanying
consolidated balance sheets of Coachmen Industries, Inc. and subsidiaries (the Company) as
of December 31, 2004 and 2003, and the related consolidated statements of income,
shareholders equity, and cash flows for each of the three years in the period ended
December 31, 2004. Our audits also included the financial statement schedule listed in the
Index at Item 15(a)(2). These financial statements and schedule are the responsibility of
the Companys management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Coachmen Industries, Inc. and subsidiaries at December
31, 2004 and 2003, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 2004, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the information
set forth therein.

We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over financial reporting as of
December 31, 2004, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 4, 2005 expressed an unqualified opinion thereon.

Ernst & Young LLP

Grand Rapids, Michigan
March 4, 2005

25

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Report of Independent Registered Public Accounting Firm
On Internal Control Over Financial Reporting

Board of Directors and ShareholdersCoachmen Industries, Inc.

We have audited managements
assessment, included in the accompanying Managements Report on Internal Control Over
Financial Reporting, that Coachmen Industries, Inc. and subsidiaries (the Company)
maintained effective internal control over financial reporting as of December 31, 2004,
based on criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The
Companys management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion on managements
assessment and an opinion on the effectiveness of the companys internal control over
financial reporting based on our audit.

We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.

A companys internal control
over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material
effect on the financial statements.

Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

In our opinion, managements
assessment that Coachmen Industries, Inc. and subsidiaries maintained effective internal
control over financial reporting as of December 31, 2004, is fairly stated, in all
material respects, based on the COSO criteria. Also, in our opinion, Coachmen Industries,
Inc. and subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2004, based on the COSO criteria.

26

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We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Coachmen Industries, Inc. and subsidiaries as of December
31, 2004 and 2003, and the related consolidated statements of income, shareholders
equity, and cash flows for each of the three years in the period ended December 31, 2004
of Coachmen Industries, Inc. and subsidiaries and our report dated March 4, 2005 expressed
an unqualified opinion thereon.

Ernst & Young LLP

Grand Rapids, MIMarch 4,
2005

27

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Coachmen Industries, Inc.
and Subsidiaries

Consolidated Balance
Sheets as of December 31 (in thousands)

`Assets 
                                                 2004           2003
                                                 ----           ----
CURRENT ASSETS
  Cash and temporary cash investments          $ 14,992       $  6,408
  Marketable securities                           1,747          5,667
  Trade receivables, less allowance for
   doubtful receivables 2004 - $919 and
   2003 - $1,208                                 58,805         46,232
  Other receivables                               4,209          1,906
  Refundable income taxes                           244            642
  Inventories                                   136,088        101,100
  Prepaid expenses and other                      4,144          4,622
  Deferred income taxes                           6,014          5,959
                                               --------       --------

    Total current assets                        226,243        172,536

Property, plant and equipment, net               82,351         79,225
Goodwill                                         18,132         18,954
Cash value of life insurance, net of loans       25,162         36,506
Real estate held for sale                            60            -
Other                                             5,775          3,467
                                               --------       --------

    TOTAL ASSETS                               $357,723       $310,688
                                               ========       ========


Liabilities and Shareholders' Equity

CURRENT LIABILITIES
  Accounts payable, trade                      $ 33,805       $ 30,486
  Accrued income taxes                            2,479          2,511
  Accrued expenses and other liabilities         39,466         37,586
  Floor plan notes payable                        6,986            -
  Short-term borrowings and current
   maturities of long-term debt                  22,195          5,990
                                               --------       --------

    Total current liabilities                   104,931         76,573

Long-term debt                                   14,943          9,419
Deferred income taxes                             3,512          4,089
Postretirement deferred compensation benefits     9,724          9,172
Other                                               195            284
                                               --------       --------

    Total liabilities                           133,305         99,537
                                               --------       --------

COMMITMENTS AND CONTINGENCIES (Note 12)

SHAREHOLDERS' EQUITY
  Common shares, without par value: authorized
   60,000 shares; issued 2004 - 21,108
   shares and 2003 - 21,086 shares               91,850         91,539
  Additional paid-in capital                      8,894          7,616
  Retained earnings                             184,284        172,700
  Treasury shares, at cost, 2004 - 5,384
    shares and 2003 - 5,533 shares              (59,002)       (59,858)
  Unearned compensation                          (1,700)        (1,136)
  Accumulated other comprehensive income             92            290
                                               --------       --------

    Total shareholders' equity                  224,418        211,151
                                               --------       --------

    TOTAL LIABILITIES AND
      SHAREHOLDERS' EQUITY                     $357,723       $310,688
                                               ========       ========`

See Notes to Consolidated
Financial Statements.

28

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Coachmen Industries, Inc. and
Subsidiaries

Consolidated Statements of Incomefor
the years ended December 31(in thousands, except per share amounts)

`2004          2003         2002
                                            ----          ----         ----

Net sales                                 $865,144      $698,376     $651,028
Cost of sales                              740,525       596,308      554,173
                                          --------      --------     --------

    Gross profit                           124,619       102,068       96,855
                                          --------      --------     --------

Operating expenses:
  Delivery                                  41,569        33,814       30,324
  Selling                                   31,523        25,811       22,752
  General and administrative                34,221        32,526       31,210
  Gain on sale of properties, net           (1,754)         (471)      (2,342)
                                          --------      --------     --------
                                           105,559        91,680       81,944
                                          --------      --------     --------

    Operating income                        19,060        10,388       14,911
                                          --------      --------     --------

Nonoperating (income) expense:
  Interest expense                           2,199         1,332        1,476
  Investment income                         (2,394)       (1,045)        (463)
  Other (income) expense, net                 (378)         (344)        (630)
                                          --------      --------     --------
                                              (573)          (57)         383
                                          --------      --------     --------

    Income from continuing operations
    before income taxes                     19,633        10,445       14,528

Income taxes                                 6,208         3,526        4,909
                                          --------      --------     --------

    Net income from continuing operations   13,425         6,919        9,619

Discontinued operations
  Income from operations of
   discontinued entity (net of taxes of
   $82, $230, and $158, respectively)          174           446          310
  Gain on sale of assets of discontinued
   entity (net of taxes of $816)             1,735             -            -
                                          --------      --------     --------
    Income from discontinued operations      1,909           446          310

    Net Income                            $ 15,334      $  7,365     $  9,929
                                          ========      ========     ========

Earnings per share - Basic
    Continuing operations                 $    .87      $    .45     $    .60
    Discontinued operations                    .12           .03          .02
                                               ---           ---          ---
      Net earnings per share                   .99           .48          .62
Earnings per share - Diluted
    Continuing operations                      .87           .45          .60
    Discontinued operations                    .12           .03          .02
                                               ---           ---          ---
      Net earnings per share                   .99           .48          .62

Number of common shares used in the
computation of earnings per share:
    Basic                                   15,483        15,437       15,996
    Diluted                                 15,551        15,487       16,107`

See Notes to Consolidated
Financial Statements.

29

---

Coachmen Industries, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 2004, 2003 and 2002
(in thousands, except per share amounts)

`Additional
                                    Comprehensive       Common Shares     Paid-In    Retained
                                    Income(Loss)      Number       Amount      Capital     Earnings
                                    ------------      ------       ------      -------     --------
Balance at January 1, 2002                            21,046    $  91,072   $   5,755    $ 162,646
  Net income                          $   9,929         --          --           --          9,929
  Reduction in unrealized losses on
    securities net of taxes of $105         270         --          --           --           --
                                      ---------
  Total comprehensive income          $  10,199
                                      =========

  Issuance of common shares upon
    the exercise of stock options
    net of tax benefit of $121                          --          --           (222)        --
  Issuance of common shares under
    employee stock purchase plan                          16         211         --           --
  Issuance of common shares from
    treasury                                            --           --           600         --
  Acquisition of common shares
    for treasury                                        --           --          --           --
  Cash dividends of $.22 per
    common share                                        --           --          --         (3,521)
                                                   ---------    ---------    --------     --------
Balance at December 31, 2002                          21,062       91,283       6,133      169,054
                                                   ---------    ---------    --------     --------

  Net income                          $   7,365         --          --           --          7,365
  Net unrealized gain on securities
    net of taxes of $681                  1,111         --          --           --           --
 Net unrealized loss on cash flow
    hedges net of taxes of $98             (160)        --          --           --           --
                                     ---------
  Total comprehensive income          $   8,316
                                      =========
  Issuance of common shares upon
    the exercise of stock options
    net of tax benefit of $37                           --          --           112          --
  Issuance of common shares under
    employee stock purchase plan                          24          256        --           --
  Issuance of common shares from
    treasury                                            --          --         1,371          --
  Acquisition of common shares
    for treasury                                        --          --           --           --
  Cash dividends of $.24 per
    common share                                        --          --           --         (3,719)
                                                   ---------   ---------    ---------    ---------
Balance at December 31, 2003                          21,086      91,539        7,616      172,700
                                                   ---------   ---------    ---------    ---------
Comprehensive Income - 2004
  Net income                          $  15,334         --          --           --         15,334
  Net unrealized loss on
    securities net of taxes of $160        (262)        --          --           --           --
 Net unrealized gain on
    cash flow hedges net of
    taxes of $39                             64         --          --           --           --
                                     ---------
  Total comprehensive income          $  15,136
                                      =========
  Issuance of common shares upon
    the exercise of stock options
    net of tax benefit of $46                           --           --           250         --
  Issuance of common shares under
    employee stock purchase plan                          22         311         --           --
  Issuance of common shares from
    treasury                                            --           --         1,028         --
  Cash dividends of $.24 per
    common share                                        --           --          --         (3,750)
                                                   ---------   ---------    ---------    ---------
Balance at December 31, 2004                          21,108   $  91,850    $   8,894    $ 184,284
                                                   =========   =========    =========    =========`

---

`Accumulated
                                                                                  Other            Total
                                         Treasury Shares         Unearned      Comprehansive    Shareholders'
                                         Number     Amount     Compensation      Income(Loss)      Equity
                                         ------     ------     ------------      ------------      ------

 Balance at January 1, 2002               (5,110) $(49,902)         --              $(931)       $208,640
  Net income                                --        --            --                --            9,929
  Reduction in unrealized losses on
    securities net of taxes of $105         --        --            --                270             270
  Total comprehensive income
  Issuance of common shares upon
    the exercise of stock options
    net of tax benefit of $121               164     1,044          --                --              822
  Issuance of common shares under
    employee stock purchase plan            --        --            --                --              211
  Issuance of common shares from
    treasury                                  58       332          --                --              932
  Acquisition of common shares
    for treasury                            (507)   (7,857)         --                --           (7,857)
  Cash dividends of $.22 per
    common share                            --        --            --                --           (3,521)
                                       --------- ---------        ------            -----        --------
Balance at December 31, 2002              (5,395)  (56,383)         --               (661)        209,426
                                       --------- ---------        ------            -----        --------

  Net income                                --        --            --                --            7,365
  Net unrealized gain on securities
    net of taxes of $681                    --        --            --               1,111          1,111
  Net unrealized loss on cash flow
    hedges net of taxes of $98              --        --            --                (160)          (160)
  Total comprehensive income
  Issuance of common shares upon
    the exercise of stock options
    net of tax benefit of $37                 25       143          --                --              255
  Issuance of common shares under
    employee stock purchase plan            --        --            --                --              256
  Issuance of common shares from
    treasury                                 130         736      $(1,136)            --              971
  Acquisition of common shares
    for treasury                            (293)     (4,354)         --              --           (4,354)
  Cash dividends of $.24 per
    common share                            --        --            --                --           (3,719)
                                       ---------   ---------     --------             ------       --------
Balance at December 31, 2003              (5,533)    (59,858)      (1,136)             290        211,151
                                       ---------   ---------     --------             ------       --------

Comprehensive Income - 2004
  Net income                                --        --            --                --           15,334
  Net unrealized loss on
    securities net of taxes of $160         --        --            --                (262)         (262)
  Net unrealized gain on
    cash flow hedges net of
    taxes of $39                            --        --            --                  64             64
  Total comprehensive income
 Issuance of common shares upon
    the exercise of stock options
    net of tax benefit of $46                34        199          --                --              449
  Issuance of common shares under
    employee stock purchase plan            --        --            --                --              311
  Issuance of common shares from
    treasury                                115        657         (564)              --            1,121
  Cash dividends of $.24 per
    common share                            --        --            --                --           (3,750)
                                       --------  ---------        -------           ------     ----------

Balance at December 31, 2004             (5,384)  $(59,002)       $(1,700)          $   92       $ 224,418
                                       ========   ========        =======           ======       =========`

See Notes to Consolidated Financial Statements.

30

---

Coachmen Industries, Inc. and
Subsidiaries

Consolidated Statements of Cash Flows
for the years ended December 31(in thousands)

`2004         2003       2002
                                                      ----         ----       ----

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                       $ 15,334     $  7,365   $  9,929
  Adjustments to reconcile net income to
    net cash provided by (used in) operating
    activities:
      Depreciation                                    9,402        9,678      9,927
      Provision for doubtful receivables                200          574        183
      Net realized and unrealized (gains)/losses on
        marketable securities and derivatives            93          (74)     1,048
      Gain on sale of properties and other assets,
        net of losses                                (4,305)        (471)    (2,343)
      Gain on sale of intangible assets              (1,550)        -          -
      Increase in cash surrender value of
        life insurance policies                      (1,074)      (2,055)    (1,472)
      Deferred income tax provision (benefit)          (892)         309      2,802
      Tax benefit from stock options exercised           46           37        121
      Other                                           2,696        2,170      1,529
      Changes in certain assets and liabilities, net
        of effects of acquisitions and dispositions:
          Trade receivables                         (15,076)     (17,732)    (5,245)
          Inventories                               (34,789)     (16,090)    (4,533)
          Prepaid expenses and other                    478         (210)       244
          Accounts payable, trade                     3,319       11,685       (143)
          Income taxes - accrued and refundable         366        3,525         91
          Accrued expenses and other liabilities      1,880       (2,270)     1,010
                                                    -------      -------    -------
              Net cash provided by (used in)
                operating activities                (22,322)      (3,559)    13,148
                                                    -------      -------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales of marketable securities        3,629       30,975     32,157
  Proceeds from sale of properties and other assets   7,034        2,869     10,004
  Investments in marketable securities               (2,582)     (26,072)   (31,756)
  Purchases of property and equipment               (16,477)     (12,067)    (5,283)
  Other                                              (1,377)         902       (294)
                                                    -------      -------    -------
              Net cash provided by (used in)
                investing activities                 (9,773)      (3,393)     4,828
                                                    -------      -------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from short-term borrowings                39,938       32,000       -
  Payments of short-term borrowings                 (17,952)     (27,000)      -
  Proceeds from long-term debt                        8,036          571       -
  Payments of long-term debt                         (1,307)      (1,161)      (919)
  Proceeds from borrowings on cash value of
    life insurance policies                          20,000
  Repay borrowings against cash value of life
    insurance policies                               (5,000)        -       (18,458)
  Issuance of common shares under stock
    incentive plans                                     714          474        912
  Cash dividends paid                                (3,750)      (3,719)    (3,521)
  Purchases of common shares for treasury              -          (4,354)    (7,857)
                                                    -------      -------    -------
              Net cash provided by (used in)
                financing activities                 40,679       (3,189)   (29,843)
                                                    -------      -------    -------`

31

---

Coachmen Industries, Inc.
and Subsidiaries

Consolidated Statements
of Cash Flows, Continued

`2004         2003       2002
                                                      ----         ----       ----

Increase (decrease) in cash and temporary cash
  investments                                         8,584      (10,141)   (11,867)

CASH AND TEMPORARY CASH INVESTMENTS
  Beginning of year                                   6,408       16,549     28,416
                                                   --------     --------   --------

  End of year                                      $ 14,992     $  6,408   $ 16,549
                                                   ========     ========   ========


Supplemental disclosures of cash flow
  information:
    Cash paid during the year for:
      Interest                                     $  1,460     $  1,109   $ 1,153
      Income taxes                                    7,114        2,130     4,626`

See Notes to Consolidated
Financial Statements.

32

---

Coachmen Industries, Inc. and
Subsidiaries

Notes to Consolidated
Financial Statements

|1. |  | NATURE OF OPERATIONS AND ACCOUNTING POLICIES Nature
of Operations  Coachmen Industries, Inc. and its subsidiaries (the
Company) manufacture a full array of recreational vehicles and system-built
housing and buildings. Recreational vehicles are sold through a nationwide dealer network.
The system-built products (single-family homes, multi-family dwellings, schools, offices,
commercial facilities and specialized structures) are sold to builders/dealers or directly
to the end user for certain specialized structures.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Principles
of Consolidation  The accompanying consolidated financial statements include the
accounts of Coachmen Industries, Inc. and its subsidiaries, all of which are wholly or
majority owned. All intercompany transactions have been eliminated in consolidation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Use
of Estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenue
Recognition  For the Recreational Vehicle Segment, the shipping terms are free on
board (FOB) shipping point and title and risk of ownership are transferred to
the independent dealers at that time. Accordingly, sales are recognized as revenue at the
time the products are shipped. For the Housing and Building Segment, the shipping terms
are generally FOB destination. Title and risk of ownership are transferred when the
Company completes installation of the product. The Company recognizes the revenue at the
time delivery and installation are completed. Revenue from final set-up procedures, which
are perfunctory, is deferred and recognized when such set-up procedures are completed.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
Flows and Noncash Activities  For purposes of the consolidated statements of cash
flows, cash and temporary cash investments include cash, cash investments and any highly
liquid investments purchased with original maturities of three months or less.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Noncash
investing and financing activities are as follows (in thousands):

`2004         2003        2002
                                                                  ----         ----        ----
      Issuance of common shares, at market
         value, in lieu of cash compensation                     $1,121     $   991     $   932
      Note receivable received in connection with the sale of
         certain assets (see also Note 11)                        1,000           -            -`

| | Concentrations
of Credit Risk Financial instruments that potentially subject the Company to credit
risk consist primarily of cash and temporary cash investments and trade receivables.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
December 31, 2004 and 2003, cash and temporary cash investments invested in money market
accounts and short-term bond funds was less than $0.1 million.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

33

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|1. |  | NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued
|-- |  | -------------------------------------------------------

| | The
Company has a concentration of credit risk in the recreational vehicle industry, although
there is no geographic concentration of credit risk. The Company performs ongoing credit
evaluations of its customers financial condition and sales to its recreational
vehicle dealers are generally subject to pre-approved dealer floor plan financing whereby
the Company is paid upon delivery or shortly thereafter. The Company generally requires no
collateral from its customers. Future credit losses are provided for currently through the
allowance for doubtful receivables and actual credit losses are charged to the allowance
when incurred.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Marketable
Securities  Marketable securities consist of public utility preferred stocks which
pay quarterly cash dividends. The preferred stocks are part of a dividend capture program
whereby preferred stocks are bought and held for the purpose of capturing the preferred
dividend. The securities are available to be sold after exceeding the minimum 45 or 90-day
holding period required for favorable tax treatment and the proceeds are reinvested again
in preferred stocks. The Companys dividend capture program is designed to maximize
dividend income which is 70% excludable from taxable income under the Internal Revenue
Code and related state tax provisions. The Company accounts for its marketable securities
under Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities, which
requires certain securities to be categorized as either trading, available-for-sale or
held-to-maturity. Based on the Companys intent to invest in the securities at least
through the minimum holding period, the Companys marketable securities at December
31, 2004 and 2003 are classified as available-for-sale and, accordingly, are carried at
fair value with net unrealized appreciation (depreciation) recorded as a separate
component of shareholders equity. The Company has previously concluded that certain
marketable securities which had been in a loss position for nine or more months were
other-than-temporarily impaired and the loss position on those securities were charged
against earnings. At December 31, 2004 and 2003, there were unrealized losses of $355,500
and $457,800, respectively, that were considered other-than-temporary. The cost of
securities sold is determined by the specific identification method and are classified as
short-term marketable securities based on the intended holding period.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
cost, unrealized gains and losses, and market value of securities available for sale as of
December 31, 2004 and 2003 are as follows (in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

`2004          2003
                                                         ----          ----
           Cost                                         $1,807        $5,399
           Recognized losses for other-than-
            temporary impairment                         ( 356)        ( 458)
           Unrealized gains                                296           726
           Unrealized losses                                 -             -
                                                        ------        ------

           Market value                                 $1,747        $5,667
                                                        ======        ======`

| | The Company utilizes U.S. Treasury
bond futures options to mitigate the impact of increases in interest rates on the fair
value of the Companys investments in marketable securities (fixed rate preferred
stocks). The options are marked to market with market value changes recognized in the
consolidated statements of income in the period of change. At December 31, 2004 and 2003,
the carrying amounts of U.S. Treasury bond futures options, which are derivative
instruments, aggregated $2,000 and $10,000 respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

34

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|1. |  | NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued
|-- |  | -------------------------------------------------------

| | Investment
income consists of the following for the years ended December 31 (in thousands):
| | -------------------------------------------------------------------------------------------

`2004         2003        2002
                                                ----         ----        ----
     Interest income                           $  344       $  107      $  818
     Increase in cash value of life insurance
       policies                                 1,148        1,241           -
     Dividend income on
       preferred stocks                           770          415         839
     Net realized gains (losses) on sale of
       preferred stocks and bond funds            586         (342)       (920)
     Net realized gains (losses) on closed
       U.S. Treasury bond futures options         (55)          82        (240)
     Other than temporary unrealized losses on
       preferred stocks                          (390)        (458)          -
     Unrealized gains (losses) on open
       U.S. Treasury bond futures options          (9)           -         (34)
                                               ------       ------      ------

          Total                                $2,394       $1,045      $  463
                                               ======       ======      ======`

| | Fair
Value of Financial Instruments The carrying amounts of cash and temporary cash
investments, receivables and accounts payable approximated fair value as of December 31,
2004 and 2003, because of the relatively short maturities of these instruments. The
carrying amount of long-term debt, including current maturities, approximated fair value
as of December 31, 2004 and 2003, based upon terms and conditions currently available to
the Company in comparison to terms and conditions of the existing long-term debt. The
Company has investments in life insurance contracts principally to fund obligations under
deferred compensation agreements (see Note 9). At December 31, 2004 and 2003, the carrying
amount of life insurance policies, which equaled their fair value, was $25.2 million
($40.2 million, net of $15 million of policy loans) and $36.5 million, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
required by SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, the Company adopted the requirements of SFAS No. 133 effective January
1, 2001. SFAS No. 133, as amended by Statement No.s. 137 and 138, requires that all
derivative instruments be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. The Company utilizes U.S.
Treasury bond futures options, which are derivative instruments, and changes in market
value are recognized in current earnings. The Company has also entered into various
interest rate swap agreements to manage the economic risks associated with fluctuations in
interest rates by converting a portion of the Companys variable rate debt to a fixed
rate basis, thus reducing the impact of changes in interest rates on future interest
expense. These financial instruments have been designated as cash flow hedges, with
changes in fair value being included as a component of other comprehensive income (loss)
within shareholders equity. Hedge effectiveness is evaluated by the hypothetical
derivative method and any hedge ineffectiveness is reported as interest expense. Hedge
ineffectiveness was not material in 2004 or 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Inventories
 Inventories are valued at the lower of cost (first-in, first-out method) or market.
| | -------------------------------------------------------------------------------------------------

35

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|1. |  | NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued
|-- |  | -------------------------------------------------------

| | Property,
Plant and Equipment  Property, plant and equipment are carried at cost less
accumulated depreciation. Amortization of assets held under capital leases is included in
depreciation and amortized over the estimated useful life of the asset. Depreciation is
computed using the straight-line method on the costs of the assets, at rates based on
their estimated useful lives as follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Land improvements                                   3-15  years
               Buildings and improvements                         10-30  years
               Machinery and equipment                             3-10  years
               Transportation equipment                             2-7  years
               Office furniture and fixtures,
                including capitalized computer software            2-10  years`

| | Upon sale or retirement of property,
plant and equipment, including real estate held for sale and rental properties, the asset
cost and related accumulated depreciation is removed from the accounts and any resulting
gain or loss is included in earnings.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Evaluation of Impairment of
Long-Lived Assets  In June 2001, the FASB issued SFAS No. 142, Goodwill and
Other Intangible Assets, which revised the standard for accounting for goodwill and
other intangible assets. Statement No. 142 requires that goodwill and indefinite lived
identifiable intangible assets no longer be amortized, but be tested for impairment at
least annually based on their estimated fair market values. Any impairment of goodwill
must be recognized currently as a charge to earnings in the financial statements. The
provisions for SFAS No. 142 became effective on January 1, 2002 and required full
implementation of the impairment measurement provisions by December 31, 2002. The Company
completed its initial impairment analysis under SFAS No. 142 in June 2002 and performed
its annual impairment analyses as of October 31, thereafter. Based on the estimated fair
values of the Companys reporting units using a discounted cash flows valuation, no
goodwill for any unit was evaluated as impaired. Effective January 1, 2002, the Company
discontinued recording goodwill amortization expense.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company periodically reviews its
long-lived assets and finite-lived intangible assets for impairment and assesses whether
significant events, changes in business circumstances or economic trends indicate that the
carrying value of the assets may not be recoverable. An impairment loss, equal to the
difference between carrying value and fair value, is recognized after an indicator of
impairment has occurred. Such an indicator would be when the carrying amount of an asset
exceeds the anticipated undiscounted future cash flows expected to result from use of the
asset or a decision is made to dispose of the asset.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Warranty Expense  The Company
offers to its customers a variety of warranties on its products ranging from 1 to 2 years
in length and up to ten years on certain structural components. Estimated costs related to
product warranty are accrued at the time of sale and included in cost of sales. Estimated
costs are based upon past warranty claims and sales history and adjusted as required to
reflect actual costs incurred, as information becomes available. Warranty expense totaled
$22.2 million, $16.5 million and $16.6 million in 2004, 2003 and 2002, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

36

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|1. |  | NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued
|-- |  | -------------------------------------------------------

| | Changes
in the Companys warranty liability during the years ended December 31, 2004 and 2003
were as follows (in thousands):
| | -----------------------------------------------------------------------------------------------------------------------------

`2004      2003
                                                           ----      ----

     Balance of accrued warranty at January 1            $ 8,658    $ 8,796

     Warranties issued during the period and
      changes in liability for pre-existing warranties    22,189     16,467

     Cash settlements made during the period             (20,707)   (16,605)
                                                         -------    -------

     Balance of accrued warranty at December 31          $10,140    $ 8,658
                                                         =======    =======`

| | Stock-Based
Compensation  On March 1, 2003, the Company adopted the Performance Based Restricted
Stock Plan initiated to motivate and reward participants for superior achievement of the
Companys pre-established long-term financial performance goals. This new plan,
effective as of January 1, 2003, utilizes variable plan accounting, meaning that the cost
of the awards are expensed over the vesting period based upon the fair value of the
estimated shares to be earned at the end of the vesting period.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes, by plan year, the number of contingent shares awarded,
forfeited and the remaining contingent shares outstanding as of December 31, 2004:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Plan Year
                                                         2004         2003
                                                         ----         ----
     Contingent shares awarded                          99,600       88,500

     Shares forfeited                                    2,400       16,590
                                                        ------       ------

     Contingent shares outstanding
      as of December 31, 2004                           97,200       71,910
                                                        ======       ======`

| | The
exact number of shares that each employee will receive is dependent on the Companys
performance, with respect to net income, over a three-year period. The amount expensed
during the years ended December 31, 2004 and 2003 was $871,000 and $523,000, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company also has stock option plans and an employee stock purchase plan, which are
described more fully in Note 8. The Company accounts for these plans under the recognition
and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. No stock-based employee compensation cost is
reflected in net earnings for these plans, as all options granted under these plans have
an exercise price equal to the market value of the underlying common stock at the date of
grant. The following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, to stock-based compensation.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

37

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|1. |  | NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued
|-- |  | -------------------------------------------------------

| | Had
the Company adopted the provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, the Companys pro forma net income and net income per share would
have been:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`2004         2003         2002
                                           ----         ----         ----
      Net income, as reported            $15,334      $ 7,365      $ 9,929

      Add: Stock-based compensation expense
       under variable plan included in
       reporting net income, net of taxes    584          347           -

      Deduct: Total stock-based employee
       compensation expense determined under
       fair value based method for all awards,
       net of taxes                         (739)        (943)        (517)
                                          -------      -------      -------

      Pro forma net income               $15,179      $ 6,769      $ 9,412
                                         =======      =======      =======

      Earnings per share:

        Basic - as reported                  .99          .48          .62
        Basic - pro forma                    .98          .44          .59

        Diluted - as reported                .99          .48          .62
        Diluted - pro forma                  .98          .44          .58`

| | The
pro forma amounts and the weighted-average grant-date fair-value of options granted were
estimated using the Black-Scholes option-pricing model with the following assumptions:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`2004         2003         2002
                                            ----         ----         ----
      Risk free interest rate               3.05%        3.05%        3.68%
      Expected life                         4.00 years   4.00 years   4.00 years
      Expected volatility                   49.3%        49.4%        48.6%
      Expected dividends                     1.5%         1.8%         1.4%`

| | New Accounting Pronouncements 
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB
Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement
No. 95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is similar to
the approach described in Statement 123. However, Statement 123(R) requires all
share-based payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma disclosure is no
longer an alternative.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Statement 123(R) must be adopted no
later than July 1, 2005 for the Company. Early adoption will be permitted in periods in
which financial statements have not yet been issued. The Company expects to adopt
Statement 123(R) on July 1, 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Statement
123(R) permits public companies to adopt its requirements using one of two methods:
| | ---------------------------------------------------------------------------------------------

|1. |  | A modified prospective method in which compensation cost is
               recognized beginning with the effective date (a) based on the requirements of
               Statement 123(R) for all share-based payments granted after the effective date
               and (b) based on the requirements of Statement 123 for all awards granted to
               employees prior to the effective date of Statement 123(R) that remain unvested
               on the effective date.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

38

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|1. |  | NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued
|-- |  | -------------------------------------------------------

|2. |  | A modified retrospective method which includes the requirements of
               the modified prospective method described above, but also permits entities to
               restate based on the amounts previously recognized under Statement 123 for
               purposes of pro forma disclosures either (a) all prior periods presented or (b)
               prior interim periods of the year of adoption.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
company is still evaluating the adoption alternatives available to adopt Statement 123(R).
The available options are (a) modified-prospective method, (b) the modified-retrospective
method, restating all prior periods or (c) the modified-retrospective method, restating
only the prior interim periods of 2005.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
permitted by Statement 123, the Company currently accounts for share-based payments to
employees using Opinion 25s intrinsic value method and, as such, generally
recognizes no compensation cost for employee stock options. Accordingly, the adoption of
Statement 123(R)s fair value method will have an impact on our results of
operations, although it will have no impact on our overall financial position. The impact
of adoption of Statement 123(R) cannot be predicted at this time because it will depend on
levels of share-based payments granted in the future. However, had we adopted Statement
123(R) in prior periods, the impact of that standard would have approximated the impact of
Statement 123 as described in the disclosure of pro forma net income and earnings per
share as previously noted. Statement 123(R) also requires the benefits of tax deductions
in excess of recognized compensation cost to be reported as a financing cash flow, rather
than as an operating cash flow as required under current literature. This requirement will
reduce net operating cash flows and increase net financing cash flows in periods after
adoption.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Research
and Development Expenses  Research and development expenses charged to operations
were approximately $8,040,000; $7,220,000; and $6,370,000 for the years ended December 31,
2004, 2003 and 2002, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Shipping
and Handling Costs The Company records freight billed to customers as sales. Costs
incurred related to shipping and handling of products are reported as delivery expense in
operating expenses.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Comprehensive
Income (Loss) Comprehensive income (loss) represents net earnings and any revenues,
expenses, gains and losses that, under accounting principles generally accepted in the
United States, are excluded from net earnings and recognized directly as a component of
shareholders equity. The components of accumulated other comprehensive income (loss)
are as follows (in thousands):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Unrealized     Accumulated
                                        Unrealized      Gains(Losses)      Other
                                        Gains(Losses)   on Cash Flow   Comprehensive
                                        on Securities      Hedges       Income(Loss)
                                        -------------      ------       ------------
   Balances at January 1, 2002            $ (931)         $   -           $ (931)
   Other comprehensive income (loss)         270              -              270
                                          ------          ------          ------

   Balances at December 31, 2002            (661)             -             (661)
   Other comprehensive income (loss)       1,111            (160)            951
                                          ------          ------          ------

   Balances at December 31, 2003             450            (160)            290
   Other comprehensive income (loss)        (262)             64            (198)
                                          ------          ------          ------

   Balances at December 31, 2004          $  188          $  (96)         $   92
                                          ======          ======          ======`

39

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|1. |  | NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued
|-- |  | -------------------------------------------------------

| | Volume-Based
Sales and Dealer Incentives The Company nets certain dealer incentives, including
volume-based bonuses, interest reimbursements and other rebates, against revenue in
accordance with EITF 00-22 and EITF 01-09.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Income
Taxes The Company recognizes income tax expense in accordance with SFAS No. 109,
Accounting for Income Taxes. Deferred tax assets and liabilities are established for the
expected future tax consequences of events that have been included in the financial
statements or tax returns using enacted tax rates in effect for the years in which the
differences are expected to reverse and are subject to ongoing assessment of
realizability. Deferred income tax expense (benefit) represents the change in net deferred
tax assets and liabilities during the year.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. |  | SEGMENT INFORMATION
|-- |  | -------------------

| | The
Company has determined that its reportable segments are those that are based on the
Companys method of internal reporting, which disaggregates its business by product
category. The Companys two reportable segments are recreational vehicles, including
related parts and supplies, and housing and building. The Company evaluates the
performance of its segments and allocates resources to them based on performance. The
accounting policies of the segments are the same as those described in Note 1 and there
are no inter-segment revenues. During 2004, management adjusted its method for allocating
corporate expenses to better reflect the actual use of corporate resources by the
divisions. Historically, corporate expenses were allocated based on revenues. The new
methodology allocates the expenses based on three dimensions: revenues, subsidiary
structure and number of employees. The segment data presented below has been adjusted to
reflect this change in corporate expense allocation. In addition, the recreational vehicle
data excludes the results of the discontinued operation (see Note 11). Differences between
reported segment amounts and corresponding consolidated totals represent corporate income
or expenses for administrative functions and income, costs or expenses relating to
property and equipment that are not allocated to segments.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

40

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|2. |  | SEGMENT INFORMATION, Continued.
|-- |  | -------------------------------

| | The
table below presents information about segments, including product class information
within the Recreational Vehicle Segment, used by the chief operating decision maker of the
Company for the years ended December 31 (in thousands):
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`2004          2003          2002
                                             ----          ----          ----
    Net sales:
      Recreational vehicles
         Motorhomes                        $422,631      $304,625      $263,749
         Travel trailers
           and fifth wheels                 143,697       135,536       119,053
         Camping trailers                    22,866        17,543        21,693
         Truck campers                            4            13            11
         Parts and supplies                  17,079        17,692        16,878
                                           --------      --------      --------

          Total recreational vehicles       606,277       475,409       421,384

      Housing and buildings                 258,867       222,967       229,644
                                           --------      --------      --------

          Consolidated total               $865,144      $698,376      $651,028
                                           ========      ========      ========

    Gross profit
      Recreational vehicle                 $ 60,070      $ 45,148      $ 41,702
      Housing and building                   64,369        56,971        55,337
      Other reconciling items                   180           (51)         (184)
                                           --------      --------      --------
         Total                             $124,619      $102,068      $ 96,855
                                           ========      ========      ========

    Operating expenses
      Recreational vehicle                 $ 48,685      $ 41,409      $ 36,331
      Housing and building                   56,357        49,629        45,157
      Other reconciling items                   517           642           456
                                           --------      --------      --------
         Total                             $105,559      $ 91,680      $ 81,944
                                           ========      ========      ========

     Operating income/(loss)
       Recreational vehicle                $ 11,385      $  3,739      $  5,371
       Housing and building                   8,012         7,342        10,180
       Other reconciling items                 (337)         (693)         (640)
                                           --------      --------      --------
         Total                             $ 19,060      $ 10,388      $ 14,911
                                           ========      ========      ========

    Pre-tax income/(loss) from
    continuing operations
      Recreational vehicle                 $ 11,614      $  3,784      $  5,015
      Housing and building                    8,315         7,281         9,944
      Other reconciling items                  (296)         (620)         (431)
                                           --------      --------      --------
         Total                             $ 19,633      $ 10,445      $ 14,528
                                           ========      ========      ========

    Total assets
      Recreational vehicles                $174,101      $126,157      $ 93,571
      Housing and buildings                 111,099       105,056        97,765
      Other reconciling items                72,523        79,475       101,859
                                           --------      --------      --------
         Total                             $357,723      $310,688      $293,195
                                           ========      ========      ========`

41

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|2. |  | SEGMENT INFORMATION, Continued.
|-- |  | -------------------------------

| | The
following specified amounts are included in the measure of segment pretax income or loss
reviewed by the chief operating decision maker (in thousands):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------

`2004          2003          2002
                                             ----          ----          ----
    Interest expense:
         Recreational vehicles             $    136      $    277      $    299
         Housing and buildings                  323           227           528
         Other reconciling items              1,740           828           649
                                           --------      --------      --------

           Consolidated total              $  2,199      $  1,332      $  1,476
                                           ========      ========      ========

    Depreciation:
         Recreational vehicles             $  3,477      $  2,869      $  2,737
         Housing and buildings                4,181         4,268         4,400
         Other reconciling items              1,744         2,541         2,790
                                           --------      --------      --------

           Consolidated total              $  9,402      $  9,678      $  9,927
                                           ========      ========      ========`

3.    
          INVENTORIES.

Inventories
consist of the following (in thousands):

`2004          2003
                                                      ----          ----
      Raw materials                                $ 39,524      $ 32,452
      Work in process                                21,173        15,256
      Improved lots                                   2,236         2,314
      Finished goods                                 73,155        51,078
                                                   --------      --------

        Total                                      $136,088      $101,100
                                                   ========      ========`

4.    
          PROPERTY, PLANT AND EQUIPMENT.

Property,
plant and equipment consists of the following (in thousands):

`2004          2003
                                                      ----          ----
      Land and improvements                        $ 15,671      $ 15,889
      Buildings and improvements                     78,359        76,250
      Machinery and equipment                        33,241        29,575
      Transportation equipment                       16,127        14,707
      Office furniture and fixtures                  20,311        19,252
                                                   --------      --------

        Total                                       163,709       155,673
      Less, accumulated depreciation                 81,358        76,448
                                                   --------      --------

        Property, plant and equipment, net         $ 82,351      $ 79,225
                                                   ========      ========`

42

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|5. |  | SHORT-TERM BORROWINGS.
|-- |  | ----------------------

| | The
Company maintains a Revolving Credit Facility that provides an unsecured line of credit
aggregating $35 million through June 30, 2006. As of December 31, 2004, the Company had
borrowings outstanding on this facility of $10.0 million and outstanding letters of credit
of $3.0 million. Borrowings under the new Credit Facility bear interest equal to: (i) a
eurodollar rate plus an applicable margin of 1.5% to 2.0%, or (ii) a floating rate, for
any day, equal to the greater of the prime rate or the federal funds effective rate plus
..5%. The effective interest rate at December 31, 2004 was 4.38%. The Company is also
required to pay a facility fee of .25% of the daily unborrowed portion of the aggregate
commitment.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
December 30, 2004, the Company entered into an Amendment to the Credit Agreement. The
December amendment provided for a one-time short-term loan to the Company of $10 million.
At December 31, 2004, there was $10 million outstanding on this loan. This loan bears
interest at the prime rate and was due and paid in full on February 28, 2005.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Credit Facility also contains customary affirmative and negative covenants including
financial covenants requiring the maintenance of a specified consolidated current ratio,
fixed charge coverage ratio, leverage ratio and a required minimum net worth.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
December 31, 2004, the new and used recreational vehicle inventory of the Company-owned
dealership was pledged as collateral on floor plan notes aggregating $7.0 million. The
interest rate on these floor plan notes is tiered based on the outstanding note balance.
The effective rate at December 31, 2004 was 5.13%.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | LONG-TERM DEBT.
|-- |  | ---------------

Long-term
debt consists of the following (in thousands):

`2004         2003
                                                              ----         ----

      Term Loan, variable rate (4.5% at December 31,
       2004), maturities through 2009                       $ 7,188      $   -
      Obligations under industrial development revenue
       bonds, variable rates (effective weighted average
       interest rates of 2.1% and 3.1% at December 31,
       2004 and 2003, respectively), with various
       maturities through 2015                                9,200       10,065
      Obligations under Community Development Block
       Grants, fixed rates of 3.5% and 4.5% with various
       maturities through 2005                                    2           32
      Obligations under capital leases, interest imputed
       at rates ranging from 2.9% to 5.5%, with maturities
       through 2011                                             748          312
                                                            -------      -------

        Subtotal                                             17,138       10,409

      Less, current maturities of long-term debt              2,195          990
                                                            -------      -------

        Long-term debt                                      $14,943      $ 9,419
                                                            =======      =======`

| | Principal
maturities of long-term debt during the four fiscal years succeeding 2005 are as follows:
2006  $2,145,000; 2007  $2,511,000; 2008  $2,212,000; 2009 
$5,650,000 and thereafter  $2,425,000.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

43

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|6. |  | LONG-TERM DEBT, Continued.
|-- |  | --------------------------

| | In
July 2004, the Company entered into an Amendment to the Credit Agreement, which provided
for a term loan of $7.5 million, payable in monthly installments through July 2009. In
connection with the industrial development revenue bond obligations, the Company obtained,
as a credit enhancement for the bondholders, irrevocable letters of credit in favor of the
bond trustees. Under the industrial revenue bond for the Mod-U-Kraf Homes manufacturing
facility in Virginia , the issuer of the letter of credit holds a first lien and security
interest on that facility. The agreements relating to these letters of credit contain,
among other provisions, certain covenants relating to required amounts of working capital
and net worth and the maintenance of certain required financial ratios. At December 31,
2004, the Company was in compliance with all related covenants.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
January of 2003, the Company entered into various interest rate swap agreements that
became effective beginning in October of 2003. These swap agreements are designated as
cash flow hedges under the provisions of Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities, and are
used to manage the economic risks associated with fluctuations in interest rates by
converting a portion of the Companys variable-rate debt to a fixed-rate basis
through November of 2011, thus reducing the impact of changes in interest rates on future
interest expense. Hedge effectiveness is evaluated by the hypothetical derivative method.
Any hedge ineffectiveness is reported within the interest expense caption of the
statements of income. Hedge ineffectiveness was not material in 2004 or 2003. The fair
value of the Companys interest rate swap agreements represents the estimated
receipts or payments that would be made to terminate the agreements. If, in the future,
the interest rate swap agreements are determined to be ineffective hedges or are
terminated before the contractual termination dates, or if it became probable that the
hedged variable cash flows associated with the variable-rate borrowings would stop, the
Company would be required to reclassify into earnings all or a portion of the unrealized
amounts on cash flow hedges included in accumulated other comprehensive income (loss)
within shareholders equity.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
December 31, 2004, the Company had four interest rate swap agreements with notional
amounts of $1.8 million, $350,000, $3.4 million, and $2.0 million, respectively, that were
used to convert the variable interest rates on certain industrial development revenue
bonds to fixed rates. In accordance with the terms of the swap agreements, the Company
pays 3.39%, 3.12%, 3.71%, and 3.36% interest rates, respectively, and receives the Bond
Market Association Index (BMA), calculated on the notional amounts, with net receipts or
payments being recognized as adjustments to interest expense. The Company recorded a
liability for the potential early settlement of these new swap agreements in the amount of
$167,000 at December 31, 2004 and $267,000 at December 31, 2003. This exposure represents
the fair value of the swap instruments and has been recorded in the balance sheets in
accordance with SFAS No. 133 as a noncurrent liability. The effective portion of the cash
flow hedge has been recorded, net of taxes, as a reduction of shareholders equity as
a component of accumulated other comprehensive loss.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

44

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|7. |  | ACCRUED EXPENSES AND OTHER LIABILITIES.
|-- |  | ---------------------------------------

Accrued
expenses and other liabilities at year-end consist of the following (in thousands):

`2004         2003
                                                              ----         ----

          Wages, salaries, bonuses and commissions           $ 5,366      $ 4,953
          Dealer incentives, including volume bonuses,
            dealer trips, interest reimbursement,
            co-op advertising and other rebates                5,119        3,839
          Warranty                                            10,140        8,658
          Insurance-products and general liability,
            workers compensation, group health and other       5,589        6,361
          Customer deposits and unearned revenues              7,340        7,000
          Other current liabilities                            5,912        6,775
                                                             -------      -------

           Total                                             $39,466      $37,586
                                                             =======      =======`

|8. |  | COMMON STOCK MATTERS AND EARNINGS PER SHARE.
|-- |  | --------------------------------------------

| | Stock Option Plan
| | -----------------

| | The
Company has stock option plans, including the 2000 Omnibus Stock Incentive Program (the
2000 Plan), which was approved by the shareholders on May 4, 2000. The 2000
Plan provides for an additional one million common shares to be reserved for grants under
the Companys stock option and award plans. The Companys stock option plan
provides for the granting of options to directors, officers and eligible key employees to
purchase common shares. The 2000 Plan permits the issuance of either incentive stock
options or nonqualified stock options. Stock Appreciation Rights (SARs)
may be granted in tandem with stock options or independently of and without relation to
options. There were no SARs outstanding at December 31, 2004 or 2003. The option
price for incentive stock options shall be an amount of not less than 100% of the fair
market value per share on the date of grant and the option price for nonqualified stock
options shall be an amount of not less than 90% of the fair market value per share on the
date the option is granted. No such options may be exercised during the first year after
grant, and are exercisable cumulatively in four installments of 25% each year thereafter.
Options have terms ranging from five to ten years.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

45

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|8. |  | COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued.
|-- |  | -------------------------------------------------------

The
following table summarizes stock option activity (number of shares in thousands):

`Weighted-
                                                                       Average
                                                   Number             Exercise
                                                  of Shares             Price
                                                  ---------             -----
    Outstanding, January 1, 2002                    1,016              $13.84
      Granted                                         102               16.69
      Canceled                                       (135)              19.37
      Exercised                                      (267)               8.37
                                                    -----

    Outstanding, December 31, 2002                    716               15.74
      Granted                                          36               12.41
      Canceled                                       (180)              18.17
      Exercised                                       (26)               8.66
                                                    -----

    Outstanding, December 31, 2003                    546               15.05
      Granted                                          -                   -
      Canceled                                       (184)              20.52
      Exercised                                       (35)              12.21
                                                    -----

    Outstanding, December 31, 2004                    327              $12.26
                                                    =====`

| | Options
outstanding at December 31, 2004 are exercisable at prices ranging from $7.88 to $18.68
per share and have a weighted average remaining contractual life of 6.5 years. The
following table summarizes information about stock options outstanding and exercisable at
December 31, 2004 (in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Options Outstanding       Options Exercisable
                                     Weighted-
                        Number        Average    Weighted-      Number      Weighted-
                   Outstanding at   Remaining    Average    Exercisable at  Average
      Range of       December 31,   Contractual  Exercise    December 31,   Exercise
   Exercise Price        2004          Life        Price         2004         Price
   --------------        ----          ----        -----         ----         -----
   $7.88 - $12.00         233           6.2       $10.61          201        $10.46
   12.01 -  17.00          82           7.2        16.12           39         16.29
   17.01 -  18.68          12           8.0        18.15            5         18.34
                          ---                                     ---
                          327                                     245
                          ===                                     ===`

| | At
December 31, 2003 and 2002 there were exercisable options to purchase 373,000 and 395,000
shares, respectively, at weighted-average exercise prices of $15.88 and $16.62,
respectively. There were no options granted during 2004. The weighted-average grant-date
fair value of options granted during the years ended December 31, 2003 and 2002 were $4.55
and $6.31, respectively. As of December 31, 2004, 1,194,000 shares were reserved for the
granting of future stock options and awards, compared with 1,129,000 shares at December
31, 2003.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

46

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|8. |  | COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued.
|-- |  | -------------------------------------------------------

| | Stock Award Programs
| | --------------------

| | On
October 19, 1998, the Board of Directors approved a Stock Award Program, which provided
for the awarding to key employees of up to 109,000 shares of common stock from shares
reserved under the Companys stock option plan. This Stock Award Program expired
December 31, 2002, therefore no shares were awarded, issued or canceled in 2004 or 2003.
During the year ended December 31, 2002, no shares were awarded, 8,800 shares were issued
and 300 shares were canceled. The shares under the stock award program were issued in four
annual installments of 25% beginning one year from the date of grant. The Company
recognized compensation expense over the term of the awards. No compensation expense was
recognized for the years ended December 31, 2004 or 2003. During the year ended December
31, 2002, compensation expense of $196,000 was recognized.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
2000 Plan also permits the granting of restricted and unrestricted stock awards to the
Companys key employees and non-employee directors. In accordance with the provisions
of the 2000 Plan, the Board of Directors may grant shares of stock to eligible
participants for services to the Company. Restricted shares vest over a period of time as
determined by the Board of Directors and are granted at no cost to the recipient. For
restricted shares that are not subject to pre-established Company performance objectives,
compensation expense is recognized over the vesting period at an amount equal to the fair
market value of the shares on the grant date. Compensation expense for discretionary
unrestricted stock awards is recognized at date of grant. There were 17,900; 14,200 and
4,600 restricted non-contingent stock awards granted at a weighted-average per share
grant-date fair value of $15.95, $14.98, and $18.68 in 2004, 2003 and 2002, respectively.
Compensation expense of $148,700, $124,600, and $134,000 was recognized in the years ended
December 31, 2004, 2003 and 2002, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
March 1, 2003, the Company adopted the Performance Based Restricted Stock Plan covering
115,000 shares of common stock per performance period for officers and other key
employees. The purpose of the plan is to permit grants of shares, subject to restrictions,
to key employees of the Company as a means of retaining and rewarding them for long-term
performance and to increase their ownership in the Company. Shares awarded under the plan
entitle the shareholder to all rights of common stock ownership except that the shares may
not be sold, transferred, pledged, exchanged or otherwise disposed of during the
restriction period. There is also a requirement to forfeit the award upon certain
terminations of employment, in cases other than death, disability or retirement. The plan,
effective as of January 1, 2003, is accounted for in accordance with the variable plan
accounting provisions of FASB Interpretation No. 44, Accounting for Certain Transactions
Involving Stock Compensation, and therefore awards are expensed based upon the fair value
of the estimated shares to be earned over the vesting period. The exact number of shares
that each employee will receive is dependent on the Companys performance, with
respect to net income, over a three-year period. The weighted-average grant-date fair
value was $16.65 and $11.18 in 2004 and 2003, respectively, for the shares awarded under
the plan. The market value of the shares awarded is recognized as unearned compensation in
the consolidated statements of shareholders equity and is amortized to operations
over the vesting period. The Company amortized $871,300 and $523,400 to compensation
expense for the years ended December 31, 2004 and 2003, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

47

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|8. |  | COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued.
|-- |  | -------------------------------------------------------

| | The
following table summarizes the activity of this program (in thousands):
| | ---------------------------------------------------------------------------

`Number
                                                  of Shares

    Outstanding, January 1, 2003                       -
      Granted                                      88,500
      Forfeited                                    (1,800)
                                                  -------

    Outstanding, December 31, 2003                 86,700
      Granted                                      99,600
      Forfeited                                   (17,190)
                                                  -------

    Outstanding, December 31, 2004                169,110
                                                  =======`

| | Stock Purchase Plan
| | -------------------

| | The
Company has an employee stock purchase plan under which a total of 431,000 shares of the
Companys common stock are reserved for purchase by full-time employees through
weekly payroll deductions. Shares of the Companys common stock are purchased
quarterly by the employees at a price equal to the lesser of 90% of the market price at
the beginning or end of the quarter. As of December 31, 2004, there were 303 employees
actively participating in the plan. Since its inception, a total of 390,000 shares have
been purchased by employees under the plan. The Company sold to employees 21,600, 24,300
and 16,500 shares at weighted fair values of $14.48, $10.53 and $12.77 in 2004, 2003 and
2002, respectively. Certain restrictions in the plan limit the amount of payroll
deductions an employee may make in any one quarter. There are also limitations as to the
amount of ownership in the Company an employee may acquire under the plan.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Earnings Per Share
| | ------------------

| | Basic
earnings per share is based on the weighted average number of shares outstanding during
the period. Diluted earnings per common share is based on the weighted average number of
shares outstanding during the period, after consideration of the dilutive effect of stock
options and awards and shares held in deferred compensation plans. Basic and diluted
earnings per share were calculated using the average shares as follows (in thousands):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`2004         2003         2002
                                                     ----         ----         ----
     Numerator:
      Net income available
       to common stockholders                      $15,334      $ 7,365      $ 9,929

     Denominator:
      Number of shares outstanding, end of period:
       Common stock                                 15,724       15,553       15,667
       Effect of weighted average contingently
        liable shares outstanding during period       (172)         (77)          -
       Effect of weighted average shares
        outstanding during period                      (69)         (39)         329
                                                    ------       ------       ------
      Weighted average number of common
       shares used in basic EPS                     15,483       15,437       15,996
      Effect of dilutive securities
       Stock options and awards                         68           50          101
                                                    ------       ------       ------
       Deferred compensation plans                      -            -            10
      Weighted average number of common
       shares used in diluted EPS                   15,551       15,487       16,107
                                                    ======       ======       ======`

48

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|8. |  | COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued.
|-- |  | -------------------------------------------------------

| | For
the years ended December 31, 2004, 2003 and 2002, 85,400, 285,275 and 305,300 shares,
respectively, of outstanding stock options were not included in the computation of diluted
earnings per share because their exercise price was greater than the average market prices
for the respective periods and their inclusion would have been antidilutive.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
sum of quarterly earnings per share may not equal year-to-date earnings per share due to
rounding and changes in diluted potential common shares.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | Shareholder
Rights Plan
| | -----------------------

| | On
October 21, 1999, the Companys Board of Directors adopted a new shareholder rights
plan to replace an existing rights plan that was due to expire on February 15, 2000. The
new rights plan, which became effective January 12, 2000 (the Record Date),
provides for a dividend distribution of one common share purchase right (the
Rights) for each outstanding common share to each shareholder of record on the
Record Date. The Rights will be represented by common share certificates and will not be
exercisable or transferable apart from the common shares until the earlier to occur of (i)
ten (10) business days following a public announcement that a person or group of persons
(an Acquiring Person) has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding common shares or (ii) ten (10)
business days following the commencement of (or announcement of an intention to make) a
tender offer or exchange offer if, upon consummation thereof, such an Acquiring Person
would be the beneficial owner of 20% or more of the outstanding common shares. Upon the
occurrence of the certain events and after the Rights become exercisable, each right would
entitle the rightholder (other than the Acquiring Person) to purchase one fully paid and
nonassessable common share of the Company at a purchase price of $75 per share, subject to
anti-dilutive adjustments. The Rights are nonvoting and expire February 1, 2010. At any
time prior to a person or a group of persons becoming an Acquiring Person, the
Companys Board of Directors may redeem the Rights in whole, but not in part, at a
purchase price $.01 per Right.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9. |  | COMPENSATION AND BENEFIT PLANS.
|-- |  | -------------------------------

| | Incentive Compensation
| | ----------------------

| | The
Company has incentive compensation plans for its officers and other key management
personnel. The amounts charged to expense for the years ended December 31, 2004, 2003 and
2002 aggregated $3,516,000, $1,598,000, and $2,959,000, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

49

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued.

|9. |  | COMPENSATION AND BENEFIT PLANS, Continued.
|-- |  | ------------------------------------------

| | Deferred Compensation
| | ---------------------

| | The
Company has established a deferred compensation plan for executives and other key
employees. The plan provides for benefit payments upon termination of employment,
retirement, disability, or death. The Company recognizes the cost of this plan over the
projected service lives of the participating employees based on the present value of the
estimated future payment to be made. The plan is funded by insurance contracts on the
lives of the participants. At December 31, 2004 and 2003, the carrying amount of these
policies, which equaled their fair value, was $22,496,000 ($37,496,000, net of $15,000,000
of policy loans) and $35,117,000, respectively. The deferred compensation obligations,
which aggregated $7,632,000 and $7,588,000 at December 31, 2004 and 2003, respectively,
are included in other non-current liabilities, with the current portion ($372,000 and
$364,000 at December 31, 2004 and 2003, respectively) included in other current
liabilities.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with the acquisitions of Miller Building Systems and Mod-U-Kraf Homes in 2000,
the Company assumed obligations under existing deferred compensation agreements. During
2003, the trustees of the Miller plan elected to dissolve their plan and release the
collateral to the five remaining participants in the plan. Liquidation of the Miller plan
had no impact on earnings. The remaining liability recognized in the consolidated balance
sheet related to Mod-U-Kraf aggregated $417,000 and $536,000 at December 31, 2004 and
2003, respectively. As part of the Mod-U-Kraf acquisition, the Company assumed ownership
of life insurance contracts and trust accounts established for the benefit of
participating executives. Such assets, which are valued at fair value, aggregated $60,000
and $58,000 at December 31, 2004 and 2003, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Supplemental Deferred Compensation
| | ----------------------------------

| | The
Company has established a supplemental deferred compensation plan (Mirror Plan) for key
employees as determined by the Board of Directors. The plan allows participants to defer
compensation only after they had deferred the maximum allowable amount under the
Companys 401(k) Plan. The participants select certain mutual funds investments and
Company stock whose performance is tracked by the Company. In addition, the Company
matches a certain level of participant contributions that vests over a five-year period.
Under the plan, the investments are not funded directly, including the matching
contributions and investments in Company stock. Instead, the plan administrator tracks the
performance of investments in mutual funds and Company stock as directed by the
participant and a liability to the participants is recorded by the Corporation based on
the performance of the phantom investments. Participant benefits are limited to the value
of the vested benefits recorded on their behalf.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has also established a supplemental deferred compensation plan (Executive Savings
Plan) for certain key executive management as determined by the Board of Directors. This
plan allows participants to defer compensation without regard to participation in the
Companys 401(k) plan. The participants select certain mutual funds investments and
Company stock whose performance is tracked by the Company. In addition, the Company
matches a certain level of participant contributions that vests after a five-year period.
Under the plan, the investments are not funded directly, including the matching
contributions and investments in Company stock. Instead, the plan administrator tracks the
performance of investments in mutual funds and Company stock as directed by the
participant and a liability to the participants is recorded by the Corporation based on
the performance of the phantom investments. Participant benefits are limited to the value
of the vested benefits recorded on their behalf. Liabilities recorded on the consolidated
balance sheets related to these plans as of December 31, 2004 and 2003 are $2,190,000 and
$1,523,000, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

50

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|9. |  | COMPENSATION AND BENEFIT PLANS, Continued.
|-- |  | ------------------------------------------

| | Employee
Benefit Plans
| | ----------------------

| | The
Company sponsors a retirement plan (the Plan), under Section 401(k) of the
Internal Revenue Code (IRS) that covers all eligible employees. The Plan is a defined
contribution plan and allows employees to make voluntary contributions up to 20% of annual
compensation. Effective January 1, 2005, the Plan was amended to allow for voluntary
contributions of up to 50% of annual compensation, not to exceed IRS limits. Under the
Plan, the Company may make discretionary matching contributions on up to 6% of
participants compensation. Expenses under the Plan aggregated $1,291,000,
$1,291,000, and $1,296,000 for the years ended December 31, 2004, 2003 and 2002,
respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. |  | INCOME TAXES.
|--- |  | -------------

| | Income
taxes (benefit) attributable to continuing operations are summarized as follows for the
years ended December 31 (in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------

`2004         2003         2002
                                                   ----         ----         ----
            Federal:
              Current                            $ 5,894      $ 2,824      $ 1,747
              Deferred                              (855)         285        2,581
                                                 -------      -------      -------

                                                   5,039        3,109        4,328
                                                 -------      -------      -------

            State:
              Current                              1,206          393          360
              Deferred                               (37)          24          221
                                                 -------      -------      -------

                                                   1,169          417          581
                                                 -------      -------      -------

                Total                            $ 6,208      $ 3,526      $ 4,909
                                                 =======      =======      =======`

| | The
following is a reconciliation of the provision for income taxes attributable to continuing
operations computed at the federal statutory rate (35% in 2004 and 2003 and 34% in 2002)
to the reported provision for income taxes (in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`2004         2003         2002
                                                   ----         ----         ----
          Computed federal income tax
            at federal statutory rate            $ 6,872      $ 3,656      $ 4,940
          Changes resulting from:
            Increase in cash surrender
              value of life insurance
              contracts                             (395)        (434)        (389)
            Current year state income taxes,
              net of federal income tax benefit      461          279          305
            Preferred stock dividend
              exclusion                             (189)        (100)        (199)
            Extraterritorial income exclusion        (57)         (50)         (34)
          Decrease in federal tax reserves,
             net of additional state tax
             reserves                               (570)          -            -
            Other, net                                86          175          286
                                                 -------      -------      -------

                Total                            $ 6,208      $ 3,526      $ 4,909
                                                 =======      =======      =======`

51

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|10. |  | INCOME TAXES, Continued.
|--- |  | ------------------------

| | For
the year ended December 31, 2004, the effective tax rate was adversely impacted by the
accrual of additional state income taxes as a result of state tax audits and the
Companys decision to participate in voluntary compliance programs of certain states.
In addition, the effective tax rate was favorably affected in 2004 by the reversal of
certain reserves for federal income taxes, which were no longer required since the statute
of limitations expired or the risk of additional tax assessments was no longer probable.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
components of the net deferred tax assets (liabilities) are as follows (in thousands):
| | ------------------------------------------------------------------------------------------

`2004            2003
                                                          ----            ----
         Current deferred tax asset (liability):
            Accrued warranty expense                    $ 2,979         $ 3,277
            Accrued self-insurance                        1,991           1,355
            Inventories                                     572             544
            Receivables                                     365             459
            Prepaid Insurance                              (394)             -
            Other                                           501             324
                                                        -------         -------

         Net current deferred
             tax asset                                  $ 6,014         $ 5,959
                                                        =======         =======


         Noncurrent deferred tax asset (liability):
          Deferred compensation                         $ 3,721         $ 2,869
          Property and equipment and other
            real estate                                  (5,216)         (4,482)
          Intangible assets                              (2,361)         (2,263)
          Other                                             344            (213)
                                                        -------         -------

       Net noncurrent deferred
          tax liability                                 $(3,512)        $(4,089)
                                                        =======         =======`

|11. |  | DISCONTINUED OPERATIONS.
|--- |  | ------------------------

| | On
December 31, 2004, the Company sold all operating assets of the Company-owned dealership
located in North Carolina. The total sale price was $11.8 million, of which the Company
received cash of $10.8 and a promissory note of $1 million. The promissory note is due in
two annual payments, including interest at 4%. The sale resulted in a gain on sale of
discontinued operations of $1.7 million, net of $.8 million in taxes. In accordance with
SFAS No. 144, the dealership qualified as a separate component of the Companys
business and as a result, the operating results and the gain on the sale of assets have
been accounted for as a discontinued operation. Previously reported financial results for
all periods presented have been restated to reflect this business as a discontinued
operation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net
sales of the North Carolina dealership for the years ended December 31, 2004, 2003, and
2002 were $20.0 million, $12.8 million, and $14.2 million, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

52

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|12. |  | COMMITMENTS AND CONTINGENCIES.
|--- |  | ------------------------------

| | Lease Commitments
| | -----------------

| | The
Company leases various manufacturing and office facilities under non-cancelable agreements
that expire at various dates through November 2011. Several of the leases contain renewal
options and options to purchase and require the payment of property taxes, normal
maintenance and insurance on the properties. Certain office and delivery equipment is also
leased under non-cancelable agreements that expire at various dates through June 2010. The
above-described leases are accounted for as operating leases.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Future
minimum annual operating lease commitments at December 31, 2004 aggregated $4,351,000 and
are payable during the next 5 years as follows: 2005  $831,000, 2006 
$797,000, 2007  $708,000, 2008  $525,000, 2009  $521,000 and $969,000
for years thereafter. Total rental expense for the years ended December 31, 2004, 2003 and
2002 aggregated $1,114,000, $1,057,000 and $1,118,000, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Obligation to Purchase Consigned Inventories
| | --------------------------------------------

| | The
Company obtains vehicle chassis for its recreational vehicle products directly from
automobile manufacturers under converter pool agreements. The agreements generally provide
that the manufacturer will provide a supply of chassis at the Companys various
production facilities under the terms and conditions as set forth in the agreement.
Chassis are accounted for as consigned inventory until either assigned to a unit in the
production process or 90 days have passed. At the earlier of these dates, the Company is
obligated to purchase the chassis and it is recorded as inventory. At December 31, 2004
and 2003, chassis inventory, accounted for as consigned inventory, approximated $29.7
million and $11.6 million, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Repurchase Agreements
| | ---------------------

| | The
Company was contingently liable at December 31, 2004 to banks and other financial
institutions on repurchase agreements in connection with financing provided by such
institutions to most of the Companys independent dealers in connection with their
purchase of the Companys recreational vehicle products. These agreements provide for
the Company to repurchase its products from the financing institution in the event that
they have repossessed them upon a dealers default. Products repurchased from dealers
under these agreements are accounted for as a reduction in revenue at the time of
repurchase. Although the estimated contingent liability approximates $298 million at
December 31, 2004 ($238 million at December 31, 2003), the risk of loss resulting from
these agreements is spread over the Companys numerous dealers and is further reduced
by the resale value of the products repurchased. Based on losses previously experienced
under these obligations, the Company has established a reserve for estimated losses under
repurchase agreements. At December 31, 2004 and 2003, $0.3 million was recorded as an
accrual for estimated losses under repurchase agreements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

53

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|12. |  | COMMITMENTS AND CONTINGENCIES, Continued.
|--- |  | -----------------------------------------

| | The
Company was also contingently liable at December 31, 2004 to a financial institution on
repurchase agreements in connection with financing provided by the institution to certain
of the Companys independent home builders in connection with their purchase of the
Companys housing products. This agreement, which began in 2004, provides for the
Company to repurchase its products from the financing institution in the event that they
have repossessed them upon a builders default. Products repurchased from builders
under this agreement are accounted for as a reduction in revenue at the time of
repurchase. Although the estimated contingent liability approximates $4.5 million at
December 31, 2004, the risk of loss resulting from these agreements is spread over the
Companys numerous builders and is further reduced by the resale value of the
products repurchased. The Company has evaluated the potential for losses under this
agreement and has recorded an accrual of $0.1 million at December 31, 2004 for estimated
losses under the repurchase agreement.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Corporate Guarantees
| | --------------------

| | The
Company was contingently liable under guarantees to financial institutions of their loans
to independent dealers for amounts totaling approximately $19.2 million at December 31,
2004, $4.6 million at December 31, 2003 and $0.9 million at December 31, 2002. During
2003, the Company entered into an agreement with a financial institution to form a
private-label financing program to provide wholesale inventory financing to the
Companys dealers in the Recreational Vehicle Segment. The agreement provides for a
preferred program that provides financing that is subject to the standard repurchase
agreement described above. In addition, the agreement provides for a reserve pool whereby
the financial institution makes available an aggregate line of credit not to exceed $40
million that will provide financing for dealers that may not otherwise qualify for credit
approval under the preferred program. No dealer being provided financing from the reserve
pool can receive an aggregate line of credit exceeding $5 million. In addition to the
standard repurchase agreement described above, for 2005 the Company will be liable to the
financial institutions for a maximum of $3.8 million of aggregate losses, as defined by
the agreement, incurred by the financial institutions on designated dealers with higher
credit risks that are accepted into the reserve pool financing program, thereafter the
Company will be liable to the financial institutions for the first $2 million of aggregate
losses. The Company has recorded a loss reserve of $0.3 million at December 31, 2004 and
$0.1 million at December 31, 2003 associated with these guarantees.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the first quarter of 2004, the Company entered into an agreement to guarantee the
indebtedness incurred by a recreational vehicle dealer towards the purchase of a
dealership facility. The guarantee is in the principal amount of $1 million for a period
of five years or until all indebtedness has been fully paid, whichever occurs first. The
Company has evaluated the potential for losses under this agreement and has determined
that the resolution of any claims that may arise in the future would not materially affect
the Companys financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition, the Company is liable under a guarantee to a financial institution for model
home financing provided to certain independent builders doing business with the
Companys Housing and Building Segment. The amount outstanding under this agreement
at December 31, 2004 is $1.2 million. Any losses incurred under this guarantee would be
offset by the proceeds from the resale of the model home and losses are limited to 20% of
the original contract price, and cannot exceed $2.0 million. As of December 31, 2004, no
losses have been incurred by the Company under the model home financing program.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

54

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|12. |  | COMMITMENTS AND CONTINGENCIES, Continued.
|--- |  | -----------------------------------------

| | Share Repurchase Programs
| | -------------------------

| | Periodically,
the Company has repurchased its common stock as authorized by the Board of Directors.
Under the repurchase program, common shares are purchased from time to time, depending on
market conditions and other factors, on the open market or through privately negotiated
transactions. There were no shares repurchased in 2004. The Company repurchased
293,000,and 507,000 shares during 2003 and 2002, respectively. At December 31, 2004, there
are 73,000 remaining shares authorized for repurchase by the Board of Directors.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Financing Obligation
| | --------------------

| | During
the second quarter of 2004, the Company entered into an agreement to provide financing of
up to $4.9 million to a developer for the construction of a hotel. After the construction loan
financing period as defined in the agreement, the construction loan may be
converted to a term loan for a period of two years, provided the terms and conditions of
the agreement are met. The loans are collateralized by a first priority interest in all
tangible and intangible property of the borrower. As of December 31, 2004, the Company has
provided $1.7 million in financing to the developer.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Self-Insurance
| | --------------

| | The
Company is self-insured for a portion of its product liability and certain other liability
exposures. Depending on the nature of the claim and the date of occurrence, the
Companys maximum exposure ranges from $250,000 to $500,000 per claim. The Company
accrues an estimated liability based on various factors, including sales levels, insurance
coverage and the amount of outstanding claims. Management believes the liability recorded
(See Note 7) is adequate to cover the Companys self-insured risk.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Change of Control Agreements
| | ----------------------------

| | On
February 3, 2000, the Company entered into Change of Control Agreements with key
executives. Under the terms of these agreements, in the event of a change in control of
the Company, as defined, the Company would be obligated to pay these key executives for
severance and other benefits. These agreements, as adjusted for subsequent changes in key
personnel, aggregated obligations of approximately $14.6 million and $14.0 million based
on salaries and benefits at December 31, 2004 and 2003, respectively. In addition, in the
event of a change of control of the Company, all outstanding stock options and SARs
shall become immediately exercisable, restrictions are removed from restricted stock and
all stock awards shall immediately be deemed fully achieved.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Also
on February 3, 2000, the Company established a rabbi trust, which in the event of a change
of control, as defined, will be funded to cover the Companys obligations under its
Change of Control Agreements and its deferred compensation plan (see Note 9).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

55

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|12. |  | COMMITMENTS AND CONTINGENCIES, Continued.
|--- |  | -----------------------------------------

| | Litigation
| | ----------

| | The
Company is involved in various legal proceedings, most of which are ordinary disputes
incidental to the industry and most of which are covered in whole or in part by insurance.
Management believes that the ultimate outcome of these matters and any liabilities in
excess of insurance coverage and self-insurance accruals will not have a material adverse
impact on the Companys consolidated financial position, future business operations
or cash flows.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13. |  | UNAUDITED INTERIM FINANCIAL INFORMATION.
|--- |  | ----------------------------------------

| | Certain
selected unaudited quarterly financial information for the years ended December 31, 2004
and 2003 is as follows (in thousands):
| | ---------------------------------------------------------------------------------------------------------------------------------------

`2004
                                                    Quarter Ended
                                    March 31    June 30    September 30  December 31
                                    --------    -------    ------------  -----------
    Net sales                       $197,465    $231,138     $232,311      $204,230
    Gross profit                      24,317      35,638       37,275        27,389
    Net income from continuing
      operations                         587       5,076        5,885         1,877
    Net income                           642       5,185        5,940         3,567
    Net income per common share-Basic
        Continuing operations            .04         .33          .38           .12
        Discontinuing operations         .00         .01          .00           .11
                                         ---         ---          ---           ---
                                         .04         .34          .38           .23
                                         ===         ===          ===           ===
    Net income per common share-Diluted
        Continuing operations            .04         .33          .38           .12
        Discontinuing operations         .00         .00          .00           .11
                                         ---         ---          ---           ---
                                         .04         .33          .38           .23
                                         ===         ===          ===           ===`

`2003
                                                    Quarter Ended
                                    March 31    June 30    September 30  December 31
                                    --------    -------    ------------  -----------
    Net sales                       $143,728    $169,772     $196,902      $187,974
    Gross profit                      16,493      26,675       32,335        26,565
    Net income/(loss)from
      continuing operations           (2,878)      2,624        5,203         1,970
    Net income/(loss)                 (2,820)      2,836        5,358         1,991
    Net income/(loss) per common
      share-Basic
        Continuing operations           (.19)        .17          .34           .13
        Discontinuing operations         .01         .01          .01           .00
                                         ---         ---          ---           ---
        Diluted                         (.18)        .18          .35           .13
                                         ===         ===          ===           ===
    Net income/(loss) per common
      share-Diluted
        Continuing operations           (.19)        .17          .34           .13
        Discontinuing operations         .01         .01          .01           .00
                                         ---         ---          ---           ---
        Diluted                         (.18)        .18          .35           .13
                                         ===         ===          ===           ===`

56

---

Coachmen Industries, Inc.
and Subsidiaries

Notes to Consolidated
Financial Statements, Continued

|13. |  | UNAUDITED INTERIM FINANCIAL INFORMATION, Continued.
|--- |  | ---------------------------------------------------

| | On
December 31, 2004, the Company sold all operating assets of the Company-owned dealership
located in North Carolina. The total sale price was $11.8 million, of which the Company
received cash of $10.8 and a promissory note of $1 million. The promissory note is due in
two annual payments, including interest. The sale resulted in a gain on sale of
discontinued operations of $1.7 million, net of $.8 million in taxes. In accordance with
Statement of Financial Accounting Standard No. 144, the dealership qualified as a separate
component of the Companys business and as a result, the operating results and the
gain on the sale of assets have been accounted for as a discontinued operation. Previously
reported financial results for all periods presented have been restated to reflect this
business as a discontinued operation.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the fourth quarter of 2004, income taxes were favorably impacted by the reversal of
certain reserves that were no longer required since the statute of limitations had expired
or the risk of additional tax assessments was no longer probable. In addition, there was
an adverse impact on state income taxes related to the accrual of additional income taxes
resulting from state audits and the Companys decision to participate in voluntary
compliance programs of certain states. The adverse impact on state income taxes was
partially offset by a favorable impact resulting from the determination that the Company
qualified for new jobs creation tax incentives. The net impact of these items on total
income tax expense from continuing operations was a reduction of $557,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Included
in the fourth quarter of 2003 were gains of $376,000 from the sale of vacant lots located
in California and investment income $870,000 which included the sale of marketable
securities and increased cash surrender value of investments in Company-owned life
insurance policies.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

57

---

Item 9.  Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure

Not Applicable in 2004.

Item 9A.  Controls and
Procedures

Conclusion Regarding the
Effectiveness of Disclosure Controls and Procedures

The Companys management, with
the participation of the Companys Chief Executive Officer and Chief Financial
Officer, has conducted an evaluation, as of December 31, 2004, of the Companys
disclosure controls and procedures; as such term is defined under Exchange Act Rule
13a-15(e). Based on this evaluation, the Companys Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and procedures
were effective as of the end of the period covered by this annual report.

Managements Report
on Internal Control Over Financial Reporting

Management is responsible for
establishing and maintaining adequate internal control over financial reporting. The
Companys internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.

Our internal control over financial
reporting includes those policies and procedures that:

| |  |  | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Provide
reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles,
and that our receipts and expenditures are being made only in accordance with authorizations of management and
directors; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on the
financial statements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree
or compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness
of the Companys internal control over financial reporting as of December 31, 2004.
In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework. Based on our assessment and those criteria, management believes that the
Company maintained effective internal control over financial reporting as of December 31,
2004.

The Companys independent
registered public accounting firm has audited and issued their report on managements
assessment of the Companys internal control over financial reporting, which appears
on page 26.

Changes in Internal
Control Over Financial Reporting

No change in the Companys
internal control over financial reporting (as such term is defined in Exchange Act Rule
13a-15(f)) occurred during the fiscal quarter ended December 31, 2004 that materially
affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.

58

---

Part III.

Item 10. Directors and
Executive Officers of the Registrant

(a)  Identification of Directors

Information regarding the
Registrants directors is contained under the caption Election of
Directors in the Companys Proxy Statement dated April 1, 2005 and is
incorporated herein by reference.

(b)  Executive Officers of the Company

See Executive Officers of the
Registrant contained herein.

(c)  Beneficial Ownership Reporting Compliance

Information for Section 16(a) Beneficial
Ownership Reporting Compliance is contained under that caption in the Companys
Proxy Statement dated April 1, 2005 and is incorporated herein by reference.

(d)  Code of Ethics

The Company has adopted a code of
ethics that applies to all of its directors, officers (including its chief executive
officer, chief operating officer, chief financial officer, controller and any person
performing similar functions) and employees. The Company has made the Code of Ethics
available on its website at http://www.coachmen.com.

(e)  
          Audit Committee and Financial Expert of the Audit Committee

Information regarding the
Registrants Audit Committee, including the committee members designated as Financial
Experts is contained under the caption Audit Committee in the Companys
Proxy Statement dated April 1, 2005 and is incorporated herein by reference.

(f)  Nominations for Director

Information regarding the
Registrants procedures for nominations for director is contained under the caption
Nominations for Director in the Companys Proxy Statement dated April 1,
2005 and is incorporated herein by reference.

Item 11. Executive
Compensation

Information for Item 11 is contained
under the headings Compensation of Executive Officers, Management
Development/Compensation Committee Report, Outside Director Compensation
and Performance Graph in the Companys Proxy Statement dated April 1,
2005 and is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Information for Item 12 is contained
under the captions Directors and Officers Stock Ownership and
Stock Ownership Information in the Companys Proxy Statement dated April
1, 2005 and is incorporated herein by reference.

59

---

The following table summarizes share
and exercise price information about the Companys equity compensation plans as of
December 31, 2004:

`Equity Compensation Plan Information

                              # of securities                             # of securities
                                to be issued        Weighted average    remaining available
                              upon exercise of     exercise price of    for future issuance
                             outstanding options,  outstanding options,     under equity
         Plan Category       warrants and rights   warrants and rights   compensation plans
         -------------       -------------------   -------------------   ------------------

Equity compensation plans
 approved by shareholders           326,650                $12.26               1,194,208

Equity compensation plans not
 approved by shareholders              -                     -                      -
                                    -------                ------               ---------

       Total                        326,650                $12.26               1,194,208
                                    =======                ======               =========`

Item 13. Certain
Relationships and Related Transactions

Not Applicable.

Item 14. Principal
Accountant Fees and Services

Information regarding the Principal
Accountant Fees and Services is contained under the caption Independent Registered
Public Accounting Firm in the Companys Proxy Statement dated April 1, 2005 and
is incorporated herein by reference.

Part IV.

Item 15. Exhibits and
Financial Statement Schedule

|    |  |                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------
|(a) |  | The following Financial Statements and Financial Statement Schedule are included
          in Item 8 herein.

|   |  |                     
|-- |  | --------------------
|1. |  | Financial Statements

| |  |                                                                                                     
| |  | ----------------------------------------------------------------------------------------------------
| |  | Reports
of Independent Registered Public Accounting Firm                                            
| |  | Consolidated Balance Sheets at
December 31, 2004 and 2003                                           
| |  | Consolidated
Statements of Income for the years ended December 31, 2004, 2003 and 2002              
| |  | Consolidated
Statements of Shareholders Equity for the years ended December 31, 2004, 2003 and
2002
| |  | Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and
2002          
| |  | Notes to Consolidated Financial Statements                                                          

|   |  |                             
|-- |  | ----------------------------
|2. |  | Financial Statement Schedule

Schedule
II  Valuation and Qualifying Accounts

| | All
other schedules required by Form 10-K Annual Report have been omitted because they were
inapplicable, included in the Notes to the Consolidated Financial Statements, or otherwise
not required under instructions contained in Regulation SX.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|   |  |         
|-- |  | --------
|3. |  | Exhibits

See
Index to Exhibits.

60

---

SCHEDULE II

VALUATION AND
QUALIFYING ACCOUNTS

`Additions
                        Balance At   Charged                      Balance
                        Beginning    To Costs     Payment or      At End
Description             Of Period  And Expenses   Utilization     Of Period
-----------             ---------  ------------   -----------     ---------
Fiscal year ended
 December 31, 2004:

Allowance for doubtful
 accounts:              $1,208,000 $   158,000    $   (447,000)(A)$   919,000

Product warranty
 reserves:              $8,658,000 $22,189,000    $(20,707,000)(B)$10,140,000

Repurchase agreement and
 Corporate guarantee
 loss reserves:         $  350,000 $   564,000    $   (188,000)   $   726,000

Fiscal year ended
 December 31, 2003:

Allowance for doubtful
 accounts:              $  861,000 $   574,000    $   (227,000)(A)$ 1,208,000

Product warranty
 reserves:              $8,796,000 $16,467,000    $(16,605,000)(B)$ 8,658,000

Repurchase agreement and
 Corporate guarantee
 loss reserves:         $  403,000 $   (11,000)(C)$    (42,000)   $   350,000

Fiscal year ended
 December 31, 2002:

Allowance for doubtful
 accounts:              $  972,000 $   183,000    $   (294,000)(A)$   861,000

Product warranty
 reserves:              $8,391,000 $16,575,000    $(16,170,000)(B)$ 8,796,000

Repurchase agreement and
 Corporate guarantee
 loss reserves:         $1,169,000 $  (306,000)(C)$   (460,000)   $   403,000`

|    |  |                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Write-off of bad debts, less recoveries.                                                                                      
|(B) |  | Claims paid, less recoveries.                                                                                                 
|(C) |  | Reflects favorable change in estimate due to improved market conditions within
          the RV industry during 2002 and 2003.

61

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SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

`COACHMEN INDUSTRIES, INC.

Date:  March 10, 2005
                                               /s/ J. P. Tomczak
                                               --------------------------------
                                                      J. P. Tomczak
                                              (Executive Vice President and
                                               Chief Financial Officer)

                                               /s/ Colleen A. Zuhl
                                              ---------------------------------
                                                    Colleen A. Zuhl
                                              (Vice President and Controller)`

Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities as of March 10, 2005.

`/s/ C. C. Skinner                          /s/ W. P. Johnson
----------------------------------         ------------------------------------
      C. C. Skinner                               W. P. Johnson
       (Director)                                  (Director)
   (Chief Executive Officer)

/s/ T. H. Corson                           /s/ P. G. Lux
----------------------------------         ------------------------------------
      T. H. Corson                                P. G. Lux
       (Director)                                  (Director)


/s/ E. W. Miller                           /s/ G. B. Bloom
----------------------------------         ------------------------------------
        E. W. Miller                                 G. B. Bloom
       (Director)                                  (Director)


/s/ R. J. Deputy                           /s/ R. Martin
----------------------------------         ------------------------------------
        R. J. Deputy                                R. Martin
       (Director)                                  (Director)


/s/ D. W. Hudler
----------------------------------
       D. W. Hudler
       (Director)`

62

---

INDEX TO EXHIBITS

Number Assigned
  In Regulation  S-K,Item 601                                       Description of Exhibit

|           |  |                                                                                                                                                                                                                                                                                                                                                          
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3)(a)(i)  |  | Articles of Incorporation of the Company as amended on  May 30, 1995 (incorporated by reference to Exhibit 3(i)  to
                the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995).                                                                                                                               
|(3)(a)(ii) |  | Articles of Amendment to Articles of Incorporation
                (incorporated by reference to Exhibit 4.2 to the Company's
                Form S-3 Registration Statement, File No. 333-14579).                                                                                                                                                      
|(3)(b)     |  | By-Laws as modified through March 1, 2005 (incorporated by reference to the
                Company's Form 8-K filed March 4, 2005).                                                                                                                                                                                                                     
|(4)(a)     |  | Credit Agreement dated as of June 30, 2003 among Coachmen
                Industries, Inc., the Lenders named therein, and Bank One,
                Indiana, N.A. (incorporated by reference to Exhibit 4(a) to
                the Company's Quarterly Report on Form 10-Q for the quarter
                ended June 30, 2003).                       
|(4)(b)     |  | Stockholder Rights Agreement (incorporated by reference to
                Exhibit 1 to Form 8-A dated January 5, 2000).                                                                                                                                                                                                                                 
|(4)(c)     |  | Amendment No. 1 to Credit Agreement dated as of October 28, 2003
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A.                                                                                                                                                                  
|(4)(d)     |  | Amendment No. 2 to Credit Agreement dated as of March 11, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A.                                                                                                                                                                    
|(4)(e)     |  | Amendment No. 3 to Credit Agreement dated as of June 30, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A.                                                                                                                                                                     
|(4)(f)     |  | Amendment No. 4 to Credit Agreement dated as of July 30, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A. (incorporated by reference to Exhibit 10.1
                to the Company's Quarterly Report on Form 10-Q for the quarter
                ended September 30, 2004).
|(4)(g)     |  | Amendment No. 5 to Credit Agreement dated as of December 1, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A. (incorporated by reference to Exhibit 10.1
                to the Company's Form 8-K filed December 8, 2004).                                                    

63

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|            |  |                                                                                                                                                                                                                                                                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4)(h)      |  | Amendment No. 6 to Credit Agreement dated as of December 30, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A. (incorporated by reference to Exhibit 10.1
                to the Company's Form 8-K filed January 4, 2005).                                       
|*(10)(a)    |  | Executive Benefit and Estate Accumulation Plan, as amended
                and restated effective as of September 30, 2000 (incorporated
                by reference to Exhibit 10(a) to the Company's Annual Report
                on Form 10-K for the fiscal year ended December 31, 2001).                                            
|*(10)(b)    |  | 2000 Omnibus Stock Incentive Program (incorporated by
                reference to Exhibit A to the Company's Proxy Statement dated
                March 27, 2000 for its Annual Meeting in 2000).                                                                                                                                         
|*(10)(b)(i) |  | Resolution regarding Amendment of 2000 Omnibus Stock
                Incentive Program adopted by the Company's Board of Directors
                on July 27, 2000 (incorporated by reference to Exhibit
                10(b)(i) to the Company's Annual Report on Form 10-K for the
                fiscal year ended December 31, 2001).
|*(10)(c)    |  | Form of Change in Control Agreements for certain executive
                officers (Tier 1) (incorporated by reference to Exhibit 10(c)
                to the Company's Annual Report on Form 10-K for the fiscal
                year ended December 31, 2000).                                                                          
|*(10)(d)    |  | Form of Change in Control Agreements for certain executive
                officers (Tier 2) (incorporated by reference to Exhibit 10(d)
                to the Company's Annual Report on Form 10-K for the fiscal
                year ended December 31, 2000).                                                                          
|*(10)(e)    |  | Coachmen Industries, Inc. Supplemental Deferred Compensation
 Plan (Amended and Restated as of January 1, 2003).                                                                                                                                                                                                                            
|*(10)(f)    |  | Executive Annual Performance Incentive Plan effective January
                1, 2002 (incorporated by reference to Exhibit 10(f) to the
                Company's Annual Report on Form 10-K for the fiscal year
                ended December 31, 2002).                                                                                 
|*(10)(g)    |  | Long Term Incentives Performance Based Restricted Stock
                Plan effective January 1, 2003 (incorporated by reference to
                Exhibit 10(g) to the Company's Annual Report on Form 10-K for
                the fiscal year ended December 31, 2002).                                                                
|*(10)(h)    |  | Form of Restricted Stock Agreement under the
Coachmen Industries, Inc. Long Term Incentives Performance Based Restricted Stock Plan.                                                                                                                                                                                                        
|(10)(i)     |  | Credit Agreement dated as of June 30, 2003 among
Coachmen Industries, Inc., the Lenders named therein, and Bank One, Indiana, N.A. (incorporated by reference
to Exhibit 4(a) in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003).                                                                          
|(10)(j)     |  | Amendment No. 1 to Credit Agreement dated as of October 28, 2003
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A. (included in Exhibit 4(c)).                                                                                                                         
|(10)(k)     |  | Amendment No. 2 to Credit Agreement dated as of March 11, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A. (included in Exhibit 4(d)).                                                                                                                           

64

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|         |  |                                                                                                                                                                                                                                                                                                                                                          
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10)(l)  |  | Amendment No. 3 to Credit Agreement dated as of June 30, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A. (included in Exhibit 4(e)).                                                                                                                                         
|(10)(m)  |  | Amendment No. 4 to Credit Agreement dated as of July 30, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A. (incorporated by reference to Exhibit 10.1
                to the Company's Quarterly Report on Form 10-Q for the quarter
                ended September 30, 2004).
|(10)(n)  |  | Amendment No. 5 to Credit Agreement dated as of December 1, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A. (incorporated by reference to Exhibit 10.1
                to the Company's Form 8-K filed December 8, 2004).                                                    
|(10)(o)  |  | Amendment No. 6 to Credit Agreement dated as of December 30, 2004
                among Coachmen Industries, Inc., the Lenders named therein and
                Bank One, Indiana, N.A. (incorporated by reference to Exhibit 10.1
                to the Company's Form 8-K filed January 4, 2005).                                                    
|(10)(p)  |  | Program Agreement and related Repurchase Agreement dated as of
                May 10, 2004 between Textron Financial Corporation and certain
                subsidiaries of Coachmen Industries, Inc. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report
 on Form 10-Q for the quarter ended September 30, 2004).            
|*(10)(q) |  | Summary of Life Insurance and Long Term
Disability Benefits for Executives.                                                                                                                                                                                                                                                                              
|*(10)(r) |  | Description of Non-management Director Compensation.                                                                                                                                                                                                                                                                                                     
|*(10)(s) |  | Summary of 2005 Performance Metrics under
the Company's Executive Annual Performance Incentive Plan.                                                                                                                                                                                                                                                     
|(11)     |  | No Exhibit - See Consolidated Statements of Income and Note 8
                of Notes to Consolidated Financial Statements, contained
                herein.                                                                                                                                                                                           
|(14)     |  | Code of Ethics (incorporated by reference to Exhibit 14 to the
               Company's Annual Report on Form 10-K for the year ended December 31, 2004).                                                                                                                                                                                                
|(21)     |  | Registrant and Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                           
|(23)     |  | Consent of Ernst & Young LLP.                                                                                                                                                                                                                                                                                                                            
|(31.1)   |  | Rule 13a-14(a) Certification of Chief Executive Officer.                                                                                                                                                                                                                                                                                                 
|(31.2)   |  | Rule 13a-14(a) Certification of Chief Financial Officer.                                                                                                                                                                                                                                                                                                 
|(32)     |  | Section 1350 Certification of Chief Executive Officer and
                Chief Financial Officer.                                                                                                                                                                                                                                                       

* Management Contract or
Compensatory Plan.

65