**UNITED STATES**SECURITIES AND EXCHANGE COMMISSION

**Washington, D.C. 20549**

**FORM 10-Q**

**(Mark One)**

**x  QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended March 31, 2007**

**o  TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**Commission file number 001-12085**

**NATIONAL R.V. HOLDINGS, INC.**

(Exact name of registrant as specified in its charter)

| **Delaware**                                      |   | **33-0371079**                        |
|---------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of                  |   | (I.R.S. Employer  Identification No.) |
| incorporation or  organization)                   |   |                                  |
|                                              |   |                                  |
| **100  West Sinclair Street, Perris, California** |   | **92571**                             |
| (Address of  principal executive offices)         |   | (Zip Code)                            |

 

Registrant’s telephone number, including area code: **(951) 436-3000**

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bysection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

YES x    NO  o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer or a non-accelerated filer. See definition of “acceleratedfiler” or “large accelerated filer” in Rule 12b-2 of the Exchange Act.

| Large  accelerated filer o |   | Accelerated  filer x |   | Non-accelerated  filer o |
|---------------------------------|--------|---------------------------|--------|-------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).

YES  o    NO  x

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

| **Class**                                |   | **Outstanding at May 8, 2007** |
|------------------------------------------|--------|----------------------------------------------------|
| Common stock,  par value $0.01 per share |   | 10,339,484                                         |

 

 

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**NATIONALR.V. HOLDINGS, INC.**

### **INDEX**

| **PART I — FINANCIAL  INFORMATION** |   |                                                                                        |
|-----------------------------------------------|--------|---------------------------------------------------------------------------------------------|
|                                          |   |                                                                                        |   |   |
| Item 1.                                       |   | Consolidated  Financial Statements (Unaudited)                                              |   |   |
|                                          |   | Consolidated Balance  Sheets - March 31, 2007 and December 31, 2006               |   |   |
|                                          |   | Consolidated  Statements of Operations - Three Months Ended March 31, 2007 and 2006    |   |   |
|                                          |   | Consolidated  Statements of Cash Flows -Three Months Ended March 31, 2007 and 2006     |   |   |
|                                          |   |                                                                                        |   |   |
|                                          |   | Notes to  Consolidated Financial Statements                                                 |   |   |
|                                          |   |                                                                                        |   |   |
| Item 2.                                       |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |   |
|                                          |   |                                                                                        |   |   |
| Item 3.                                       |   | Quantitative  and Qualitative Disclosures about Market Risk                                 |   |   |
|                                          |   |                                                                                        |   |   |
| Item 4.                                       |   | Controls and  Procedures                                                                    |   |   |
|                                          |   |                                                                                        |   |   |
| **PART II — OTHER  INFORMATION**    |   |                                                                                        |
|                                          |   |                                                                                        |   |   |
| Item  1A.                                     |   | Risk  Factors                                                                               |   |   |
|                                          |   |                                                                                        |   |   |
| Item 4.                                       |   | Submission of  Matters to a Vote of Security Holders                                        |   |   |
|                                          |   |                                                                                        |   |   |
| Item  6.                                      |   | Exhibits                                                                                    |   |   |
|                                          |   |                                                                                        |   |   |
|                                          |   | Signature                                                                                   |   |   |

 

2

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**PART I.FINANCIAL INFORMATION**

**Item 1. Consolidated Financial Statements**

**NATIONAL R.V. HOLDINGS, INC.**

**CONSOLIDATED BALANCE SHEETS**

**(In thousands, except share and per share amounts)**

**(Unaudited)**
| ** **                                                                                             | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| ASSETS                                                                                                 |       |                     |       |                        |       |
| Current assets:                                                                                        |       |                     |       |                        |       |
| Cash and cash  equivalents                                                                             |       | $                        | 7          |                        | $          | 14 |   |
| Restricted cash  and cash equivalents                                                                  |       | 266                      |       | 387                         |       |
| Receivables,  less allowance for doubtful accounts of $252 and $239, respectively                      |       | 6,159                    |       | 9,800                       |       |
| Inventories                                                                                            |       | 29,281                   |       | 28,896                      |       |
| Prepaid expenses                                                                                       |       | 498                      |       | 826                         |       |
| Deferred income  taxes                                                                                 |       | 114                      |       | 148                         |       |
| Assets of  discontinued operations (Note 2)                                                            |       | 3⁄4                   |       | 67,768                      |       |
| Total current  assets                                                                                  |       | 36,325                   |       | 107,839                     |       |
| Long-term  restricted cash and cash equivalents                                                        |       | 345                      |       | 341                         |       |
| Property, plant  and equipment, net                                                                    |       | 25,145                   |       | 25,662                      |       |
| Other assets                                                                                           |       | 1,202                    |       | 1,355                       |       |
| Total assets                                                                                           |       | $                        | 63,017     |                        | $          | 135,197 |   |
|                                                                                                   |       |                     |       |                        |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                             |       |                     |       |                        |       |
| Current liabilities:                                                                                   |       |                     |       |                        |       |
| Book overdraft                                                                                         |       | $                        | 1,547      |                        | $          | 1,720 |   |
| Accounts payable                                                                                       |       | 9,242                    |       | 17,828                      |       |
| Accrued expenses                                                                                       |       | 10,159                   |       | 9,595                       |       |
| Current portion  of capital leases                                                                     |       | 61                       |       | 63                          |       |
| Line of credit                                                                                         |       | 5,222                    |       | 29,012                      |       |
| Liabilities of  discontinued operations (Note 2)                                                       |       | 3⁄4                   |       | 35,928                      |       |
| Total current  liabilities                                                                             |       | 26,231                   |       | 94,146                      |       |
| Long-term  portion of capital leases                                                                   |       | 105                      |       | 124                         |       |
| Deferred income  taxes                                                                                 |       | 114                      |       | 148                         |       |
| Long-term accrued  expenses                                                                            |       | 4,323                    |       | 4,660                       |       |
| Total  liabilities                                                                                     |       | 30,773                   |       | 99,078                      |       |
|                                                                                                   |       |                     |       |                        |       |
| Commitments and  contingent liabilities (Note 7)                                                       |       | 3⁄4                   |       | 3⁄4                      |       |
|                                                                                                   |       |                     |       |                        |       |
| Stockholders’ equity:                                                                             |       |                     |       |                        |       |
| Preferred stock  — $0.01 par value; 5,000 shares authorized, 4,000 issued and outstanding         |       | 3⁄4                   |       | 3⁄4                      |       |
| Common stock —  $0.01 par value; 25,000,000 shares authorized, 10,339,484 issued and  outstanding |       | 103                      |       | 103                         |       |
| Additional  paid-in capital                                                                            |       | 38,437                   |       | 38,353                      |       |
| Retained deficit                                                                                       |       | (6,296                   | )          | (2,337                      | )          |
| Total  stockholders’ equity                                                                       |       | 32,244                   |       | 36,119                      |       |
| Total liabilities and  stockholders’ equity                                                       |       | $                        | 63,017     |                        | $          | 135,197 |   |

 

The accompanying notes are an integral part of theconsolidated financial statements.

3

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**NATIONAL R.V. HOLDINGS, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except per share amounts)**

**(Unaudited)**
| ** **                                           | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                           | ** ** | **2007**                                         | ** ** | **2006(1)** | ** ** |
|                                                 |       |                                             |       |   |   |
| Net sales                                            |       | $                                                | 21,930     |   | $ | 54,629 |   |
| Cost of goods sold                                   |       | 26,703                                           |       | 52,855 |   |
| Gross (loss)  profit                                 |       | (4,773                                           | )          | 1,774 |   |
| Selling expenses                                     |       | 980                                              |       | 1,236 |   |
| General and  administrative expenses                 |       | 2,679                                            |       | 2,675 |   |
| Operating loss                                       |       | (8,432                                           | )          | (2,137 | ) |
| Interest expense                                     |       | 541                                              |       | 420 |   |
| Other income                                         |       | (188                                             | )          | (61 | ) |
| Loss from  continuing operations before income taxes |       | (8,785                                           | )          | (2,496 | ) |
| Provision for income  taxes                          |       | 23                                               |       | 10 |   |
| Loss from continuing  operations                     |       | (8,808                                           | )          | (2,506 | ) |
| (Loss) income from  discontinued operations          |       | (2,409                                           | )          | 461 |   |
| Gain from sale of  discontinued operations           |       | 7,328                                            |       | 3⁄4 |   |
| Income taxes related to  discontinued operations     |       | (70                                              | )          | (9 | ) |
| Net income from  discontinued operations             |       | 4,849                                            |       | 452 |   |
| Net loss                                             |       | $                                                | (3,959     | ) | $ | (2,054 | ) |
|                                                 |       |                                             |       |   |   |
| Earnings (loss) per  share — basic and diluted  |       |                                             |       |   |   |
| Continuing  operations                               |       | $                                                | (0.85      | ) | $ | (0.24 | ) |
| Discontinued  operations                             |       | 0.47                                             |       | 0.04 |   |
| Total                                                |       | $                                                | (0.38      | ) | $ | (0.20 | ) |
|                                                 |       |                                             |       |   |   |
| Weighted average number  of shares outstanding:      |       |                                             |       |   |   |
| Basic                                                |       | 10,339                                           |       | 10,339 |   |
| Diluted                                              |       | 10,339                                           |       | 10,339 |   |

----

(1)             Adjustedto include the effect of discontinued operations.  See Note 2 for additional information

The accompanying notes are an integral part of theconsolidated financial statements.

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**NATIONAL R.V. HOLDINGS, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In thousands)**

**(Unaudited)**
| ** **                                                                                           | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                           | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Cash flows from  operating activities:                                                               |       |                                             |       |   |   |
| Net loss                                                                                             |       | $                                                | (3,959     | ) | $ | (2,054 | ) |
| Less: Loss  (income) from discontinued operations, net of taxes                                      |       | 2,409                                            |       | (452 | ) |
| Less: Gain from  sale of discontinued operations, net of taxes                                       |       | (7,258                                           | )          | — |   |
| Loss from  continuing operations                                                                     |       | (8,808                                           | )          | (2,506 | ) |
| Adjustments to  reconcile loss from continuing operations to net cash used in operating  activities: |       |                                             |       |   |   |
| Bad debt expense                                                                                     |       | 89                                               |       | 9 |   |
| Reserve and  write down (up) of inventories                                                          |       | 347                                              |       | (240 | ) |
| Depreciation and  amortization                                                                       |       | 596                                              |       | 689 |   |
| Gain on asset  disposal                                                                              |       | (24                                              | )          | (6 | ) |
| Share-based  compensation                                                                            |       | 84                                               |       | 461 |   |
| Changes in  assets and liabilities:                                                                  |       |                                             |       |   |   |
| Decrease  (increase) in receivables                                                                  |       | 3,552                                            |       | (8,027 | ) |
| (Increase)  decrease in inventories                                                                  |       | (732                                             | )          | 4,085 |   |
| Decrease  (increase) in prepaid expenses                                                             |       | 328                                              |       | (80 | ) |
| (Decrease)  increase in accounts payable                                                             |       | (8,586                                           | )          | 1,514 |   |
| Increase  (decrease) in accrued expenses                                                             |       | 227                                              |       | (838 | ) |
| Net cash used in  operating activities by continuing operations                                      |       | (12,927                                          | )          | (4,939 | ) |
| Net cash used in  discontinued operations                                                            |       | (2,061                                           | )          | (6,069 | ) |
| Net cash flow  used in operating activities                                                          |       | (14,988                                          | )          | (11,008 | ) |
|                                                                                                 |       |                                             |       |   |   |
| Cash flows from  investing activities:                                                               |       |                                             |       |   |   |
| Decrease in  restricted cash                                                                         |       | 117                                              |       | — |   |
| Purchase of  property, plant and equipment                                                           |       | (208                                             | )          | (228 | ) |
| Proceeds from  sale of assets                                                                        |       | 185                                              |       | 127 |   |
| Decrease in  other assets                                                                            |       | 121                                              |       | 65 |   |
| Net cash  provided by (used in) investing activities by continuing operations                        |       | 215                                              |       | (36 | ) |
| Proceeds from  sale of discontinued operations                                                       |       | 38,750                                           |       | — |   |
| Net cash flow  used in discontinued operations                                                       |       | —                                           |       | (1,110 | ) |
| Net cash flow  provided by (used in) investing activities                                            |       | 38,965                                           |       | (1,146 | ) |
|                                                                                                 |       |                                             |       |   |   |
| Cash flows from  financing activities:                                                               |       |                                             |       |   |   |
| (Decrease)  increase in book overdraft                                                               |       | (173                                             | )          | 272 |   |
| Principal  payments on capital leases                                                                |       | (21                                              | )          | (10 | ) |
| Net (payments  on) advances under line of credit                                                     |       | (23,790                                          | )          | 4,528 |   |
| Net cash (used  in) provided by financing activities by continuing operations                        |       | (23,984                                          | )          | 4,790 |   |
| Net cash flow  provided by discontinued operations                                                   |       | —                                           |       | 7,364 |   |
| Net cash (used  in) provided by financing activities                                                 |       | (23,984                                          | )          | 12,154 |   |
| Net decrease in cash  and cash equivalents                                                           |       | (7                                               | )          | — |   |
| Cash and cash  equivalents, beginning of the year                                                    |       | 14                                               |       | 11 |   |
| Cash and cash  equivalents, end of period                                                            |       | $                                                | 7          |   | $ | 11 |   |

 

SeeNote 10 for supplemental cash flow information.

The accompanying notes are an integral part of theconsolidated financial statements.

5

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**NATIONALR.V. HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

## **NOTE 1 — BASIS OF PRESENTATION**

***General***

The consolidated financial statements include thefinancial statements of National R.V. Holdings, Inc. and its wholly-ownedsubsidiary National RV, Inc. (“NRV”) (collectively, the “Company”).

The accompanying consolidated balance sheet as ofDecember 31, 2006, which has been derived from audited consolidated financialstatements, and the unaudited interim consolidated financial statements havebeen prepared pursuant to the rules and regulations of the United StatesSecurities and Exchange Commission (“SEC”). Certain information and notedisclosures normally included in accordance with accounting principlesgenerally accepted in the United States of America have been condensed oromitted pursuant to those rules and regulations, although the Company believesthat the disclosures made are adequate to make the information not misleading.These consolidated financial statements should be read in conjunction with theaudited consolidated financial statements for the year ended December 31, 2006and notes thereto included in the Company’s Annual Report on Form 10-K filedwith the SEC on April 2, 2007.

In the opinion of management, the accompanyingunaudited consolidated financial statements contain all adjustments necessary,consisting of normal recurring adjustments, to state fairly the consolidatedfinancial position, the results of operations and cash flows for all periodspresented, including the elimination of significant intercompany accounts inconsolidation.

Certain reclassifications, none of which affected netloss or retained earnings, have been made to prior period amounts to conform tothe current period presentation.  Asdiscussed in Note 2 below, in February 2007, the Company completed the sale ofits former wholly-owned subsidiary, Country Coach Inc. (“CCI”) whose results ofoperations have been reported as discontinued operations for all periodspresented.

***Seasonal Nature of Business Activities***

Results for the interim period are not necessarilyindicative of the results for an entire year. Seasonal factors, over which theCompany has no control, have an effect on the demand for the Company’sproducts. Demand in the recreational vehicle (“RV”) industry characteristicallydeclines over the winter season, while sales are generally highest during thespring and summer months.

***Use of Accounting Estimates***

The preparation of the consolidated financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and judgmentsthat affect the reported amount of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the consolidated financialstatements and the reported amount of revenues and expenses for each period. Onan on-going basis, management evaluates its estimates and judgments. Managementbases its estimates and judgments on historical experience and on various otherfactors that are believed to be reasonable under the circumstances, the resultsof which form the basis for making judgments about the carrying value of assetsand liabilities that are not readily apparent from other sources. Actualresults may differ from these estimates under different assumptions orconditions.

## **NOTE 2 — DISCONTINUED OPERATIONS**

In February 2007, management elected to discontinueits CCI operations and to place all tangible assets and liabilities operatingas the CCI business unit up for sale. The decision to sell CCI was made basedon management’s determination and subsequent Board approval that the sale wouldenable the Company to raise capital to reduce its debt and provide funding andresources to support the turnaround of the NRV business.  The Company was successful in identifying and securing a buyer inFebruary 2007 and finalized the sale to a related party on February 20,2007.  The Company received totalconsideration of $38.7 million for the sale of CCI.

6

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Revenue and pretax income(loss)from CCI operations for the period from January 1, 2007 to February 20,2007, reported as discontinued operations, are as follows (in thousands):
| ** **                                     | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                     | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
|                                           |       |                                                               |       |   |   |
| Revenues                                       |       | $                                                                  | 19,933     |   | $ | 58,265 |   |
| (Loss) income before  taxes                    |       | $                                                                  | (2,409     | ) | $ | 461 |   |
| Net (loss) income from discontinued operations |       | $                                                                  | (2,409     | ) | $ | 452 |   |

 

In accordance withSFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”(“SFAS No. 144”), the CCI business has been classified as a disposal group heldfor sale and has been presented as a discontinued operation in the condensedconsolidated financial statements and footnotes thereto. Prior year financialstatements have been restated to present the CCI disposal group as adiscontinued operation. The Company has evaluated the carrying amount of theCCI disposal group and determined that the recording of a loss for impairmentwas not warranted. The assets and liabilities of the discontinued operation arepresented separately under the captions “assets of discontinued operations” and“liabilities of discontinued operations,” respectively, in the condensedconsolidated balance sheets, and consist of the following (in thousands):
| ** **                                                                     | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Assets of discontinued  operations:                                            |       |                     |       |                        |       |
| Cash and cash  equivalents                                                     |       | $                        | 3⁄4     |                        | $          | 2 |   |
| Receivables,  less allowance for doubtful accounts of $0 and $60, respectively |       | 3⁄4                   |       | 9,195                       |       |
| Inventories                                                                    |       | 3⁄4                   |       | 45,521                      |       |
| Prepaid expenses                                                               |       | 3⁄4                   |       | 1,282                       |       |
| Property, plant  and equipment, net                                            |       | 3⁄4                   |       | 11,768                      |       |
| Other assets                                                                   |       | 3⁄4                   |       | 3⁄4                      |       |
| Total assets of  discontinued operations                                       |       | $                        | 3⁄4     |                        | $          | 67,768 |   |
|                                                                           |       |                     |       |                        |       |
| Liabilities of  discontinued operations:                                       |       |                     |       |                        |       |
| Book overdraft                                                                 |       | $                        | 3⁄4     |                        | $          | 507 |   |
| Accounts payable                                                               |       | 3⁄4                   |       | 21,724                      |       |
| Accrued expenses                                                               |       | 3⁄4                   |       | 13,555                      |       |
| Long-term  accrued expenses                                                    |       | 3⁄4                   |       | 142                         |       |
| Total liabilities of  discontinued operations                                  |       | $                        | 3⁄4     |                        | $          | 35,928 |   |

 

TheCompany recognized a $7.3 million gain, net of selling expenses and taxes of$0.7 million and $0.1 million respectively, on the sale of CCI net assets andhas recorded this gain as a component of operations in its statement ofoperations for the quarter ended March 31, 2007. 

## **NOTE 3 — INVENTORIES**

Inventoriesconsist of the following (in thousands):

|                   | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-------------------|------------|--------------------------|------------|-----------------------------|------------|
|              |       |                     |       |                        |       |
| Finished goods    |       | $                        | 9,281      |                        | $          | 9,474 |   |
| Work-in-process   |       | 8,915                    |       | 7,370                       |       |
| Raw materials     |       | 5,864                    |       | 6,361                       |       |
| Chassis           |       | 5,221                    |       | 5,691                       |       |
| Total inventories |       | $                        | 29,281     |                        | $          | 28,896 |   |

 

During the three months ended March 31, 2007 and 2006, the Companyrecorded a write-down of inventories to the lower of cost or market of $0.5million and $0.1 million, respectively. In addition, the Company incurred for the three-month period ended March31, 2007, current period charges of $1.6 million for fixed production overheadcosts below normal production levels which are excluded in the carrying value ofinventories. No such costs were recognized in the three-month period endedMarch 31, 2006.

7

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## **NOTE 4 — ACCRUED EXPENSES**

Accruedexpenses consist of the following (in thousands):

|                                                    | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|----------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
|                                               |       |                     |       |                        |       |
| Current accrued  expenses:                         |       |                     |       |                        |       |
| Payroll and  other accrued expenses                |       | $                        | 1,894      |                        | $          | 1,518 |   |
| Accrued sales  incentives                          |       | 1,012                    |       | 1,301                       |       |
| Warranty reserve                                   |       | 4,001                    |       | 3,834                       |       |
| Workers’  compensation self-insurance reserve |       | 1,602                    |       | 1,752                       |       |
| Other accrual  expense                             |       | 1,650                    |       | 1,190                       |       |
| Total current accrued  expenses                    |       | $                        | 10,159     |                        | $          | 9,595 |   |
|                                               |       |                     |       |                        |       |
| Long-term accrued  expenses:                       |       |                     |       |                        |       |
| Workers’  compensation self-insurance reserve |       | $                        | 3,741      |                        | $          | 4,041 |   |
| Deferred  compensation                             |       | 582                      |       | 619                         |       |
| Total long-term accrued expenses                   |       | $                        | 4,323      |                        | $          | 4,660 |   |

## **NOTE 5 — WARRANTY RESERVE**

The Company’s warranty reserve, which is included inthe consolidated financial statements under “Accrued expenses” caption, isestablished based on its best estimate of the amounts necessary to settlefuture and existing claims on products sold as of the balance sheet date. TheCompany records an estimate for future warranty-related costs based on recentactual warranty claims. Also, as part of the warranty reserve the Company’srecall reserve is established, as necessary, based on management’s estimate ofthe cost per unit to remedy a given problem and the estimated number of unitsthat will ultimately be brought in for the repair.

Thefollowing table summarizes the activity related to the warranty reserve for thethree months ended March 31, 2007 and 2006, respectively (in thousands):

|                                                                        | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                             | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Balance at January 1,                                                  |       | $                                                | 3,834      |   | $ | 4,306 |   |
| Accruals for  current liabilities and preexisting warranty adjustments |       | 1,646                                            |       | 1,162 |   |
| Payments in cash  or in kind                                           |       | (1,479                                           | )          | (1,160 | ) |
| Balance at March 31,                                                   |       | $                                                | 4,001      |   | $ | 4,308 |   |

## **NOTE 6 — CREDIT FACILITY**

During the quarterended March 31, 2007, the Company amended its asset-based revolving creditfacility in conjunction with the sale of CCI. The third amendment to the Credit Agreement commenced on February 21,2007, reducing its line-of-credit from $40 million to $15 million.  The amendment replaced UPS Capital with WellsFargo Bank as agent to the Credit Agreement. The amendment provided for the lender’s consent to the sale of stock ofCountry Coach Inc., a reduction in inventory sub-limit, a reduction in letterof credit sub-facility amount, an increase in interest rate, the establishmentof a minimum working capital availability and the addition of a prior writtenconsent requirement by the lender to the Company before entering into a saleand leaseback of the Perris, California real estate.

AtMarch 31, 2007 and December 31, 2006, the Company had outstanding loans underthe line of credit of $5.2 million and $29.0 million, respectively. Amountsborrowed under the revolving credit facility bear interest at the prime ratelisted in the Wall Street Journal plus 1.50 percentage points. At March 31, 2007,the interest rate for the borrowings under the line of credit was 9.75%.  The weighted average interest rate for theborrowing under the line of credit during the three months ended March 31, 2007and 2006 were 8.81% and 7.95%, respectively.

## **NOTE 7 — COMMITMENTS AND CONTINGENCIES**

***Sale-leasebackAgreement***

In December 2006,National R.V. Holdings (Seller-Guarantor) and an unrelated party (Buyer-Lessor)signed a Purchase and Sale Agreement (“Agreement”) for the planned sale andconveyance of property owned by National R.V. Holdings. “Property” in theagreement is primarily defined as land, inclusive of five buildings, and improvements,for total proceeds of $31.8 million. 

8

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Terms of the Agreementprovide that a leaseback contract for property sold be entered into and takeeffect concurrently to the consummation of the closing of the purchase and saleagreement with the Buyer acting as landlord, National RV Inc., a subsidiary ofNational R.V. Holdings, as tenant, and National R.V. Holdings as guarantor.

During April and May the Seller-Guarantor andBuyer-Lessor further amended the December 27, 2006 Purchase and Sale Agreementand amendments.  The various amendmentschanged the expiration dates associated with review period, Board approval andclosing dates. The dates per the most recent amendment are May 15, 16 and18 of 2007, respectively. On April 30, 2007, the Company’s Board of Directorsapproved the execution of the sale and leaseback. The Company expects tosuccessfully complete the transaction and receive funding on the May 18, 2007 closingdate. In conjunction with the completion of the sale and leaseback, to securethe release of the liens on the Perris, California property, the Company agreedto pledge a cash deposit of $7.5 million to Wells Fargo Bank.

The terms of thesales-type lease are for an initial term of 10 years with two 5-year,non-automated lease renewal options. This would result in an annualstraight-line effected non-cancelable operating lease obligation ofapproximately $3 million per year with an offset of deferred gain on the saleof assets until certain conditions are met whereby the buyer-lessorsubstantiates its interest in the property. In addition, the guarantor-parentwould be required to issue a letter of credit for $5 million to secure theperformance of its subsidiary under the sales-type lease.

***Litigation***

TheCompany is involved in legal proceedings in the ordinary course of business,including a variety of warranty, “lemon law,” product liability (all of whichare typical in the recreation vehicle industry) and employment claims. Withrespect to product liability claims, the Company’s insurance policies cover, inwhole or in part, defense costs and liability costs for personal injury orproperty damage (excluding damage to Company motorhomes). While it is impossibleto estimate with certainty the ultimate legal and financial liability withrespect to this litigation, management is of the opinion that the finalresolution of any such litigation could have an adverse effect on the Company’sfinancial position and results of operations or liquidity in a reportingperiod, and has provided an estimated reserve at March 31, 2007 and December31, 2006 of approximately $0.5 million and $0.5 million, respectively, for suchcontingencies in the consolidated financial statements.

***Recourse ofDealer Financing***

Mostof the Company’s motorhome sales are made on terms requiring payment within 15business days or less of the dealer’s receipt of the unit. Most dealers financeall, or substantially all, of the purchase price of their inventory under floorplan arrangements with banks or finance companies under which the lender paysthe Company directly. Dealers typically are not required to commence loanrepayments to such lenders for a period of at least six months. The loan is collateralizedby a lien on the motorhome. Consistent with industry practice, the Company hasentered into repurchase agreements with these lenders. In general, therepurchase agreements require the Company to repurchase a unit if the dealerdefaults on the financed unit. Upon a dealer default, the agreements generallyrequire the Company to repurchase RVs at the election of the lender providedcertain conditions are met, such as repossession of the RV by the lender, theRV being new and unused and the time elapsed between invoice date and demandfor repurchase being no longer than a specified period which is typically 18months or less. The Company’s undiscounted maximum potential exposure underthese agreements approximated $57.8 million at March 31, 2007. As withreceivables, the risk of loss under the repurchase agreements was spread over anumber of dealers and lenders and was reduced by the resale value of the RVs,which the Company would be required to repurchase. Losses under theseagreements have not been material in the past and management does not believethat any future losses under such agreements will have a material adverseeffect on the Company’s consolidated financial position, results of operationsor cash flows. Consequently, no liability has been recognized in theconsolidated financial statements.

## **NOTE 8 — SHARE BASED COMPENSATION**

Duringthe three months ended March 31, 2007 and 2006, the Company issued stockoptions totaling 510,241 and 145,000, respectively.  The fair value of each grant was estimated onthe dates of grant using the Black-Scholes option-pricing model and thefollowing assumptions:

|                                     | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|
| Dividend yield                      |       | 0.0      | %          | 0.0      | %          |
| Expected volatility                 |       | 42.0     | %          | 45.0     | %          |
| Risk-free interest rate             |       | 4.83     | %          | 4.69     | %          |
| Expected lives (in  years)          |       | 4.0      |       | 5.0      |       |
| Fair value of stock options granted |       | $        | 1.66       |     | $          | 2.79 |   |
|                                     |            |          |            |          |            |  |  |

 

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Shared-basedcompensation expense recognized in the consolidated statement of operations forthe three months ended March 31, 2007 is based on the awards ultimatelyexpected to vest and therefore has been reduced for estimated forfeitures. SFASNo. 123(R) requires forfeitures to be estimated at the time of grant andrevised, if necessary, in subsequent periods if actual forfeitures differ fromthose estimates. Pre-vesting forfeitures were estimated based on expectedemployee termination rates, which were estimated to be approximately 1% forboth officers and directors and 15% for employees for those options granted inthe period ended March 31, 2007. The estimated fair value, less the estimatedforfeitures, is amortized to compensation expense using the straight-lineattribution method.

Asummary of option activity for the three months ended March 31, 2007 ispresented below:

| Options                         | ** ** | **Shares  (in  thousands)** | ** ** | **Weighted-  Average Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term (years)** | ** ** |
|---------------------------------|------------|-----------------------------|------------|---------------------------------------------|------------|-------------------------------------------------------------------|------------|
| Outstanding at January  1, 2007 |       | 818                         |       | $                                           | 8.89       |                                                              |       |   |
| Granted                         |       | 510                         |       | $                                           | 4.25       |                                                              |       |   |
| Exercised                       |       | —                      |       | $                                           | —     |                                                              |       |   |
| Forfeited                       |       | (156                        | )          | $                                           | 4.66       |                                                              |       |   |
| Canceled                        |       | (74                         | )          | $                                           | 8.89       |                                                              |       |   |
| Outstanding at March  31, 2007  |       | 1,098                       |       | $                                           | 7.34       |                                                              | 6.3        |   |
| Exercisable at March 31, 2007   |       | 748                         |       | $                                           | 8.63       |                                                              | 4.7        |   |

 

Asummary of the status of the Company’s non-vested shares for the three monthsended March 31, 2007 is presented below:

| Options                        | ** ** | **Shares  (in thousands)** | ** ** | **Weighted-Average  Grant Date Fair  Value** | ** ** |
|--------------------------------|------------|---------------------------------|------------|--------------------------------------------------------|------------|
| Non-vested at January  1, 2007 |       | 154                             |       | $                                                      | 3.11       |   |
| Granted                        |       | 510                             |       | $                                                      | 1.66       |   |
| Vested                         |       | (158                            | )          | $                                                      | 2.46       |   |
| Forfeited                      |       | (156                            | )          | $                                                      | 1.89       |   |
| Non-vested at March 31, 2007   |       | 350                             |       | $                                                      | 1.84       |   |

 

As ofMarch 31, 2007, there was $0.5 million of total unrecognized compensation costrelated to nonvested share-based compensation arrangements that is expected tobe recognized over a weighted-average period of 2.7 years. For the three monthsended March 31, 2007 the total share based compensation expense totaled $0.1million.  Since the Company had netoperating loss carryforwards (before valuation) as of March 31, 2007, no excesstax benefit for the tax deductions related to share-based compensation wasrecognized for the three months ended March 31, 2007. Additionally, noincremental tax benefits were recognized from stock options exercised for thethree months ended March 31, 2007, which would have resulted in a reclassificationto reduce net cash provided by operating activities with an offsetting increasein net cash provided by financing activities.

## **NOTE 9 — INCOME TAXES**

Statementof Financial Accounting Standards No. 109 “Accounting for Income Taxes” (“SFASNo. 109”) requires that a valuation allowance be established when it is morelikely than not that a company’s deferred tax assets will not be realized. Indetermining whether a valuation allowance is required, the Company must takeinto account all positive and negative evidence with regard to the utilizationof deferred tax assets. SFAS No. 109 further states that it is difficult toconclude that a valuation allowance is not needed when there is negativeevidence such as cumulative losses in recent years. For the three months endedMarch 31, 2007 and 2006, the Company recorded respective non-cash charges of$0.5 million and $1.1 million to fully reserve against the net deferred taxassets realized during those periods. Allocating the valuation allowance on apro rata basis, in accordance with SFAS No. 109, resulted in current netdeferred tax assets and long-term net deferred tax liabilities of $0.1 millionat March 31, 2007 and $0.1 million at December 31, 2006.

OnJanuary 1, 2007, the Company adopted the recognition and disclosure provisionsof FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — aninterpretation of FASB statement No. 109” (“FIN 48”). Under FIN 48, taxpositions are evaluated for recognition using a more-likely-than-not threshold,and those tax positions requiring recognition are measured as the largestamount of tax benefit that is greater than 50 percent likely of being realizedupon ultimate settlement with a taxing authority that has full knowledge of allrelevant information. 

As ofthe begining of fiscal year 2007, the Company had no unrecognized tax benefits,including interest and penalties, and does not expect a significant change inthe unrecognized tax benefits in the next twelve months.

TheCompany recognizes interest and penalties to unrecognized tax benefits throughinterest and operating expenses, respectively. There were no interest andpenalties recorded as of March 31, 2007.

TheCompany is subject to periodic audits by U.S. federal and state authorities.Currently, the Company is not undergoing any audits by these taxingauthorities. The Company is no longer subject to U.S. federal tax examinationsfor years prior to 2003 and for the majority of state tax jurisdictions foryears prior to 2002. The Company’s loss carryforward amounts are generallysubject to examination and adjustment for a period of three years, beginningwhen such carry overs are utilized to reduce taxes in a future tax year.

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## **NOTE 10 — SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION**

(in thousands)
| ** **                           | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------|------------|---------------------------------------------|------------|
| ** **                           | ** ** | **2007**                                    | ** ** | **2006** | ** ** |
|                                 |       |                                        |       |   |   |
| Supplemental cash flow  information: |       |                                        |       |   |   |
| Income taxes  paid                   |       | $                                           | 35         |   | $ | 27 |   |
| Interest paid                        |       | $                                           | 802        |   | $ | 392 |   |

 

**NOTE 11 — LOSS PER SHARE**

Basicloss per share is computed by dividing net loss by the weighted average numberof common shares outstanding for the period. Diluted loss per share reflectsthe potential dilution that could occur if options were exercised or convertedinto common stock. Shares attributable to the exercise of outstanding optionsthat are anti-dilutive are excluded from the calculation of diluted loss pershare.  For the three months ended March31, 2007 and 2006, the Company excluded from the computation of dilutedearnings per share was stock options to purchase 1,097,706 and 1,216,496shares, respectively.

**NOTE 12 — RECENTLY ISSUED ACCOUNTINGPRONOUNCEMENTS**

In June 2006, the Financial Accounting Standards Board (“FASB’) issuedFASB Interpretation No. 48*, “*Accountingfor Uncertainty in Income Taxes*”*  (“FIN 48”). This Interpretation clarifies theaccounting for uncertainty in income taxes recognized in companies’ financialstatements in accordance with SFAS No. 109, “Accounting for Income Taxes.” ThisInterpretation prescribes a recognition threshold and measurement of a taxposition taken or expected to be taken in a tax return. This Interpretationalso provides guidance on derecognition, classification, interest andpenalties, accounting in interim periods, disclosure and transition. Theprovisions of FIN 48 are effective for fiscal years beginning afterDecember 15, 2006. As such, the company adopted these provisionsJanuary 1, 2007. The adoption of FIN 48 did not have a material impact onthe consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157,**“FairValue Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuringfair value in generally accepted accounting principals and expands disclosuresabout fair value measurements.  Thestatement does not require new fair value measurements, but is applied to theextent that other accounting pronouncements require or permit fair valuemeasurements.  The statement emphasizesthat fair value is a market-based measurement that should be determined basedon the assumptions that market participants would use in pricing an asset orliability.  Companies that have assetsand liabilities measured at fair value will be required to disclose informationthat enables the users of its financial statements to access the inputs used todevelop those measurements.  Thereporting entity is encouraged, but not required, to combine the fair valueinformation disclosed under this statement with the fair value informationdisclosed under other accounting pronouncements.  SFAS No. 157 is effective for fiscal yearsbeginning after November 15, 2007.  TheCompany is in the process of evaluating the provisions of the statement, butdoes not anticipate that the adoption of SFAS No. 157 will have a materialimpact on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Optionfor Financial Assets and Financial Liabilities - including an amendment of FASBStatement No. 115” (“SFAS No. 159”). SFAS No. 159 permits an entity to elect fair value as the initial andsubsequent measurement attribute for many financial assets and liabilities.Entities electing the fair value option would be required to recognize changesin fair value in earnings.  Entitieselecting the fair value option are required to distinguish, on the face of thestatement of financial position, the fair value of assets and liabilities forwhich the fair value option has been elected and similar assets and liabilitiesmeasured using another measurement attribute. SFAS No. 159 is effective for fiscal years beginning after November 15,2007.  The adjustment to reflect thedifference between the fair value and the carrying amount would be accountedfor as a cumulative-effect adjustment to retained earnings as of the date ofinitial adoption. The Company is currently evaluating the impact, if any, ofSFAS No. 159 on its consolidated financial statements.

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**Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

***DisclosureRegarding Forward Looking Statements***

*This report contains information that may constitute “forward-lookingstatements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,”“project,” “will” and similar expressions identify forward-looking statements,which generally are not historical in nature. All statements that addressoperating performance, events or developments that the Company expects oranticipates will occur in the future—including statements relating to volumegrowth, share of sales and earnings per share growth, and statements expressinggeneral optimism about future operating results—are forward-looking statements.As and when made, management believes that these forward-looking statements arereasonable. However, caution should be taken not to place undue reliance on anysuch forward-looking statements because such statements speak only as of thedate when made. The Company undertakes no obligation to publicly update orrevise any forward-looking statements, whether as a result of new information,future events or otherwise. In addition, forward-looking statements are subjectto certain risks and uncertainties that could cause actual results to differmaterially from the Company’s historical experience and its presentexpectations or projections. These risks and uncertainties include, but are notlimited to, those described in this report, in Part II, “Item 1A. RiskFactors” and elsewhere in the Annual Report on Form 10-K for the year endedDecember 31, 2006, and those described from time to time in future reportsfiled with the Securities and Exchange Commission.*

***ExecutiveOverview***

NationalR.V. Holdings, Inc. (the “Company”) through its wholly-owned subsidiary,National RV, Inc. (“NRV”), is one of the nation’s leading producers ofmotorized recreational vehicles, often referred to as RVs or motorhomes.   NRV began manufacturing RVs in 1964.  From its Perris, California facility, NRV designs,manufactures and markets Class A gas and diesel motorhomes under modelnames *Dolphin*, *Pacifica*,*Sea Breeze*, *Surf Side*,*Tradewinds* and *Tropi-Cal*.

Priorto February 20, 2007, high-end  (“Highline”)Class A diesel motorhomes were designed, manufactured and marketed through anotherwholly-owned subsidiary, Country Coach, Inc. (“CCI”) operating from JunctionCity, Oregon. CCI was sold on February 20, 2007. (See Note 2 in theaccompanying notes to the consolidated financial statements for furtherdiscussion of these discontinued operations.)

Thefollowing management’s discussion and analysis (“MD&A”) is intended to helpthe reader understand the results of operations of National R.V. Holdings, Inc.This MD&A is provided as a supplement to, and should be read in conjunctionwith, the Company’s consolidated financial statements and the accompanyingnotes to the consolidated financial statements contained within this quarterlyForm 10-Q filing. All data and other statistical information concerning theCompany in this MD&A and in Item 1A. Risk Factors give effect to the saleof CCI and, therefore, exclude CCI-related information.

For the three months ended March 31, 2007, the Companyincurred a net loss from continuing operations of $8.8 million or $0.85 pershare as compared to a net loss from continuing operations of $2.5 million or$0.24 per share for the three months ended March 31, 2006. During the firstquarter of 2006, the Company showed significant progress in its turnaroundefforts with continued market share gains and reduced losses. Early in thesecond quarter of 2006, the Company discovered a defective fiberglass issuerelated to a product received from one of its suppliers. This defectivefiberglass issue resulted in substantial unexpected costs and created aliquidity strain, which was compounded by a continued decline in the Class Aindustry. This created an environment of severe uncertainty that began tosignificantly adversely affect the Company, its employees, suppliers, customersand dealers. These challenges increased in the third and fourth quarters of2006 and significantly impacted the Company’s first quarter sales and operatingresults of 2007.

***Looking Forward***

Giventhe significant reduction in sales levels, the Company is in the process ofreducing costs, including reducing its operating foot print in order to lowerboth fixed and variable costs and increase its capacity utilization. At itsPerris facilities, the Company essentially has two operating facilities—one oneach side of the street comprised of 607,000 square feet in five buildings. TheCompany is working on consolidating its operations to one side of the streetand leasing out excess property.  Theremaining 395,000 square feet into which the Company plans to consolidate stillprovides ample space for future growth.

TheCompany continues to pursue its strategy of adding new dealers. To this end, ithas divided the country into five geographic regions, and in each region hasidentified the specific markets where it needs to add a dealer, or in somecases, work with an existing dealer to enhance the Company’s market share. TheCompany was handicapped during the latter part of 2006 in this effort byuncertainty in the market place regarding its future.  However, the sale of CCI and the resultinginfusion of cash have once again put it in a position to aggressively pursuethis effort.

TheCompany continues to invest heavily in the area of product development. Inaddition to launching the Pacifica diesel motorhome in 2006, the Company’s NRVsubsidiary also introduced a new full-length slide room and a teleslide(telescoping slide) for use in its units. The latter innovation has a patentpending, as it is the first of its kind in the industry. Both of these latterinnovations will be implemented into several of the Company’s brands during2007. The Company also continues to pursue methods of construction for itsmotorhomes that will accomplish all of the following: reduce cost ofconstruction, reduce the weight of the motorhomes, and add strength. Severalprojects to this end are well under way.

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

TheCompany has engaged a public relations firm to assist with the communication ofthese multiple efforts to its dealers and prospective and existingcustomers.  This effort will allow theCompany to effectively communicate its upcoming initiatives and begin to offsetthe negative publicity the Company has experienced over the last six months.

TheRecreation Vehicle Industry Association’s (RVIA) market expansion campaign, GORVing, now in its ninth year, is fostering greater awareness and garneringmedia attention. Though RVIA expects substantial growth for the industry in thelong-term or decade ahead, RVIA expects minimal growth for 2007.

Thisanalysis of the Company’s financial condition and operating results should beread in conjunction with the accompanying consolidated financial statementsincluding the notes thereto.

***CriticalAccounting Policies***

The preparation of theconsolidated financial statements and related disclosures in conformity withaccounting principles generally accepted in the United States of Americarequires management to make judgments, assumptions and estimates that affectthe amounts reported. See the discussion of critical accounting policies belowand in the Annual Report on Form 10-K for the year ended December 31, 2006. Forthe quarter ended March 31, 2007, there were no unusual uncertainties of amaterial nature involved in the application of these principles nor anyunusual, material variation in estimates related to these principles.

***Results ofOperations***

Comparisonof the Results of Operations for the three months ended March 31, 2007 tothe three months ended March 31, 2006:
| ** **                                           | ** ** | **Percentage of Sales**                | ** ** |
|------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                           | ** ** | **Three Months Ended  March 31,** | ** ** |
| ** **                                           | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
|                                                 |       |                                             |       |   |   |
| Net sales                                            |       | 100.0                                            | %          | 100.0 | % |
| Cost of goods sold                                   |       | 121.8                                            |       | 96.8 |   |
| Gross (loss) profit                                  |       | (21.8                                            | )          | 3.2 |   |
| Selling expenses                                     |       | 4.5                                              |       | 2.2 |   |
| General and  administrative expenses                 |       | 12.2                                             |       | 4.9 |   |
| Operating loss                                       |       | (38.5                                            | )          | (3.9 | ) |
| Interest expense                                     |       | 2.5                                              |       | 0.8 |   |
| Other income                                         |       | (0.9                                             | )          | (0.1 | ) |
| Loss from  continuing operations before income taxes |       | (40.1                                            | )          | (4.6 | ) |
| Provision for income  taxes                          |       | 0.1                                              |       | 0.0 |   |
| Loss from continuing  operations                     |       | (40.2                                            | )          | (4.6 | ) |
| (Loss) income from  discontinued operations          |       | (11.0                                            | )          | 0.8 |   |
| Gain from sale of  discontinued operations           |       | 33.4                                             |       | 0.0 |   |
| Income taxes related to  discontinued operations     |       | (0.3                                             | )          | (0.0 | ) |
| Net income from  discontinued operations             |       | 22.1                                             |       | 0.8 |   |
| Net loss                                             |       | (18.1                                            | )%         | (3.8 | )% |

 

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### **Three Months Ended March 31, 2007Compared to Three Months Ended March 31, 2006**(**amounts in thousands,except percentages**)

| ** **                                                          | ** ** | **Three Months Ended  March 31,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------------------|------------|------------|------------|-------------------|------------|
| **Consolidated Statements of Operations Data:** | ** ** | **2007**                                         | ** ** | **2006**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                                                           |       | $                                                | 21,930     |       | $          | 54,629            |       | $ | (32,699 | ) | (59.9 | )% |
| Cost of goods sold                                                  |       | 26,703                                           |       | 52,855     |       | (26,152           | )          | (49.5 | ) |
| Gross (loss)  profit                                                |       | (4,773                                           | )          | 1,774      |       | (6,547            | )          | (369.1 | ) |
| Selling expenses                                                    |       | 980                                              |       | 1,236      |       | (256              | )          | (20.7 | ) |
| General and  administrative expenses                                |       | 2,679                                            |       | 2,675      |       | 4                 |       | 0.1 |   |
| Operating loss                                                      |       | (8,432                                           | )          | (2,137     | )          | (6,295            | )          | 294.6 |   |
| Interest expense                                                    |       | 541                                              |       | 420        |       | 121               |       | 28.8 |   |
| Other income                                                        |       | (188                                             | )          | (61        | )          | (127              | )          | 208.2 |   |
| Loss from continuing  operations before income taxes                |       | (8,785                                           | )          | (2,496     | )          | (6,289            | )          | 252.0 |   |
| Provision for income  taxes                                         |       | 23                                               |       | 10         |       | 13                |       | 130.0 |   |
| Loss from continuing  operations                                    |       | (8,808                                           | )          | (2,506     | )          | (6,302            | )          | 251.5 |   |
| (Loss) income from  discontinued operations                         |       | (2,409                                           | )          | 461        |       | (2,870            | )          | (622.6 | ) |
| Gain from sale of  discontinued operations                          |       | 7,328                                            |       | —     |       | 7,328             |       | — |   |
| Income taxes related to  discontinued operations                    |       | (70                                              | )          | (9         | )          | (61               | )          | 677.8 |   |
| Net income from  discontinued operations                            |       | 4,849                                            |       | 452        |       | 4,397             |       | 972.8 |   |
| Net loss                                                            |       | $                                                | (3,959     | )          | $          | (2,054            | )          | $ | (1,905 | ) | 92.7 | % |

 

***Net sales***

Net sales decreased $32.7 million or 59.9% for thethree months ended March 31, 2007 as compared to the three months ended March31, 2006. Wholesale unit shipments of diesel motorhomes for the three monthsended March 31, 2007 were 50, down 71% from 172 units for the three monthsended March 31, 2006. Shipments of gas motorhomes for the three months endedMarch 31, 2007 were 165, down 55% from 368 units for the three monthsended March 31, 2006. The substantial decline in shipments is believed tobe the result of uncertainty in the market place regarding the Company’sfinancial condition resulting from the faulty supplier material problem in 2006and its financial aftermath.  The Companybelieves that with the substantial infusion of cash and the reduction in debtfrom the sale of CCI and the expected sale and leaseback transaction, it cannow begin to reverse the uncertainty and trend of declining sales.

***Gross profit margin***

The gross profit margin for the three months endedMarch 31, 2007 was a negative 21.8% compared to a 3.2% gross profit margin forthe three months ended March 31, 2006. The primary factors that led to thissignificant decrease in gross margins were substantially lower sales to coverfixed overhead costs, increased sales incentives, and increased warranty costsas the Company struggled to ship units amidst the severe uncertainty.

***Selling expenses***

Selling expenses decreased $0.3 million or 20.7% forthe three months ended March 31, 2007 compared to the three months ended March31, 2006 primarily due to reductions in personnel and advertising costs withinthe marketing function.

***General and administrative expenses***

General and administrative expenses totaled $2.7million for the three months ended March 31, 2007 and 2006. High one-timecosts associated with the sale of CCI in the current year, increased litigationand loan costs were offset by a reduction in personnel costs and share-basedcompensation expense per SFAS No. 123(R).

***Interest expense***

Interest expense for the three months ended March 31,2007 and 2006 was $0.5 million and $0.4 million, respectively. The increase ininterest expense reflects the increase in interest charges assessed by ourchassis suppliers.  The line of creditinterest was approximately the same for each quarter as an 8% decrease in theaverage loan balance between quarters was offset by an 11% increase in theaverage interest rate.

***Income taxes***

The overall effective tax rate for the quarter ended March 31, 2007 was2.3% compared to an effective tax rate of 0.9% for the quarter ended March 31,2006. The effective tax rate gives effect of full valuation allowance in theamount of $1.5 million and $0.9 million at March 31, 2007 and March 31, 2006.

The Company adopted the provisions of FASB Interpretation No. 48 (“FIN48”). Accounting for Uncertainty in Income Taxes, on January1, 2007. Theimplementation of Fin 48 did not have a significant impact of the Company’sconsolidated financial statements.

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***Liquidity andCapital Resources***

The Company incurred losses from continuing operationsof $8.8 million and $2.5 million for the three months ended March 31, 2007and March 31, 2006, respectively.  TheCompany showed significant progress in its turnaround efforts with market sharegains and reduced losses in the first quarter of 2006 but early in the secondquarter of 2006 it discovered a defective fiberglass issue related to a productreceived from one of its suppliers. This defective fiberglass issue resulted insubstantial unexpected costs and created a liquidity strain, which wascompounded by a continued decline in the Class A industry. This created anenvironment of severe uncertainty that began to significantly adversely affectthe Company, its employees, suppliers, customers and dealers. These challengesincreased in the third and fourth quarters of 2006 and significantly impactedthe Company’s first quarter sales and operating results in 2007.

The Company completedthe sale of CCI in February 2007 and received a total consideration of$38.7 million that was primarily used to reduce debt and infuse workingcapital.  The Company’s continuingoperations had net working capital of $10.1 million and $(18.1) million atMarch 31, 2007 and December 31, 2006, respectively. The $28.2 million increasein working capital was the result of decreases in the line of credit and inpayables of $23.8 million and $8.6 million, respectively, partially offset by adecrease of $3.6 million in accounts receivable.

In conjunction with the sale of CCI, the Company enteredinto an agreement to modify its credit agreement that among other thingsreduced the credit facility to $15 million. On April 30, 2007, theborrower and the lender established EBITDA covenants for April through December2007 and provided that there is no measurement of these covenants if theaverage combined loan and letters of credit reserve balance is less than $10.0million. Capital expenditures are limited to $2 million per year and the base interest rate is increased to the primerate plus 1.50 percentage points.  AtMarch 31, 2007 and December 31, 2006, the Company had outstanding loans underthe line of credit of $5.2 million and $29.0 million, respectively.  At March 31, 2007, the interest rate for theborrowings under the line of credit was 9.75%. The weighted average interestrate for the borrowing under the line of credit during the three months endedMarch 31, 2007 and 2006 was 8.81% and 7.95%, respectively.

During the three months ended March 31, 2007, theCompany’s continuing operations used $12.9 million of cash in its operations,which was primarily due to a loss from continuing operations of $8.8 million anddecrease in payables of $8.6 million, partially offset by a $3.6 milliondecrease in accounts receivable.  Duringthe three months ended March 31, 2006, the Company’s continuing operations used$4.9 million of cash in its operations, which was primarily due to a loss fromcontinuing operations of $2.5 million and increases in receivables of $8.0million, partially offset by a $4.1 million decrease in inventories and a $1.5million increase in accounts payable. For the three months ended March 31, 2007 net cash provided by investingactivities from continuing operations was $0.2 million, as compared to lessthan $0.1 million of net cash used for the three months ended March 31,2006.  Cash used in financing activitiesby continuing operations for the three months ended March 31, 2007 was $24.0million primarily due to the payment on the line of credit.  Net cash provided by financing activities forthe three months ended March 31, 2006 was $4.8 million, primarily due to netadvances under the line of credit of $4.5 million.

In December 2006, the Company and an unrelated partyentered into an agreement for the possible sale and leaseback of NRV’smanufacturing facilities owned by the Company for $31.8 million.  On April 30, 2007, the Company’s Board ofDirectors approved the execution of the sale and leaseback. The Company expectsto successfully complete the transaction and receive funding on the May 18,2007, the closing date.  The completionof the sale and leaseback and the outside financing through borrowings on itsline of credit will provide the liquidity required to execute its plans toreturn to operational profitability.  Theproceeds will be used to pay down the line of credit, diminish vendor interestcharges, fund the capital required to consolidate operations and provideworking capital to support the turnaround effort.  After consideration of its availableborrowing capacity and the expected proceeds from the pending sale and leasebacktransaction, the Company believes it has sufficient capital resources to fundits operations through at least May 2008. While the Company believes that itwill successfully execute the sale and leaseback and complete its plan toreturn to profitability, there can be no assurance the Company would besuccessful in its implementation of such plans.

Most of the Company’smotorhome sales are made on terms requiring payment within 15 business days orless of the dealer’s receipt of the unit. Most dealers finance all, orsubstantially all, of the purchase price of their inventory under floor planarrangements with banks or finance companies under which the lender pays theCompany directly. Dealers typically are not required to commence loanrepayments to such lenders for a period of at least six months. The loan iscollateralized by a lien on the motorhome. Consistent with industry practice,the Company has entered into repurchase agreements with these lenders. Ingeneral, the repurchase agreements require the Company to repurchase a unit ifthe dealer defaults on the financed unit. Upon a dealer default, the agreementsgenerally require the Company to repurchase RVs at the election of the lenderprovided certain conditions are met, such as repossession of the RV by thelender, the RV being new and unused and the time elapsed between invoice dateand demand for repurchase being no longer than a specified period which istypically 18 months or less. The Company’s maximum potential exposure underthese agreements approximated $57.8 million at March 31, 2007. The risk of lossunder the repurchase agreements is spread over a number of dealers and lendersand is reduced by the resale value of the RVs, which the Company would berequired to repurchase. Losses under these agreements have not been material inthe past and management does not believe that any future losses under suchagreements will have a material adverse effect on the Company’s consolidatedfinancial position, results of operations, or cash flows; consequently, noliability has been recognized in the consolidated financial statements.

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***RecentAccounting Pronouncements***

In June 2006, the Financial Accounting Standards Board (“FASB’) issuedFASB Interpretation No. 48*, “*Accountingfor Uncertainty in Income Taxes*”*  (“FIN 48”). This Interpretation clarifies theaccounting for uncertainty in income taxes recognized in companies’ financialstatements in accordance with SFAS No. 109, “Accounting for Income Taxes.” ThisInterpretation prescribes a recognition threshold and measurement of a taxposition taken or expected to be taken in a tax return. This Interpretationalso provides guidance on derecognition, classification, interest andpenalties, accounting in interim periods, disclosure and transition. Theprovisions of FIN 48 are effective for fiscal years beginning afterDecember 15, 2006. As such, the company adopted these provisionsJanuary 1, 2007. The adoption of FIN 48 did not have a material impact onthe consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157,**“FairValue Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuringfair value in generally accepted accounting principals and expands disclosuresabout fair value measurements.  The statementdoes not require new fair value measurements, but is applied to the extent thatother accounting pronouncements require or permit fair value measurements.  The statement emphasizes that fair value is amarket-based measurement that should be determined based on the assumptionsthat market participants would use in pricing an asset or liability.  Companies that have assets and liabilitiesmeasured at fair value will be required to disclose information that enablesthe users of its financial statements to access the inputs used to developthose measurements.  The reporting entityis encouraged, but not required, to combine the fair value informationdisclosed under this statement with the fair value information disclosed underother accounting pronouncements.  SFASNo. 157 is effective for fiscal years beginning after November 15, 2007.  The Company is in the process of evaluatingthe provisions of the statement, but does not anticipate that the adoption ofSFAS No. 157 will have a material impact on the Company’s consolidatedfinancial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Optionfor Financial Assets and Financial Liabilities - including an amendment of FASBStatement No. 115” (“SFAS No. 159”). SFAS No. 159 permits an entity to elect fair value as the initial andsubsequent measurement attribute for many financial assets and liabilities.Entities electing the fair value option would be required to recognize changesin fair value in earnings.  Entitieselecting the fair value option are required to distinguish, on the face of thestatement of financial position, the fair value of assets and liabilities forwhich the fair value option has been elected and similar assets and liabilitiesmeasured using another measurement attribute. SFAS No. 159 is effective for fiscal years beginning after November 15,2007.  The adjustment to reflect thedifference between the fair value and the carrying amount would be accountedfor as a cumulative-effect adjustment to retained earnings as of the date ofinitial adoption. The Company is currently evaluating the impact, if any, ofSFAS No. 159 on its consolidated financial statements.

**Item 3.Quantitative and Qualitative Disclosures about Market Risk**

Market risk represents the risk of loss that mayimpact the Company’s financial position, results of operations or cash flowsdue to adverse changes in market prices, including interest rate risk and otherrelevant market rate or price risks. The Company does not have any significantrisks related to derivative financial instruments or foreign currencytranslation. However, the Company is exposed to interest rate changes relatedprimarily to cash borrowings on the Company’s credit facility. The weightedaverage interest rate for the borrowings on the credit facility during thethree months ended March 31, 2007 and 2006 were 8.81% and 7.95%,respectively.

**Item 4. Controls and Procedures**

The Company maintains disclosure controls andprocedures that are designed to ensure that information required to bedisclosed in the Company’s reports under the Securities Exchange Act of 1934,as amended (the “Exchange Act”), is recorded, processed, summarized andreported within the time periods specified in the SEC’s rules and forms, andthat such information is accumulated and communicated to management, includingthe Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”),as appropriate, to allow timely decisions regarding required disclosure. Indesigning and evaluating the disclosure controls and procedures, managementrecognized that any controls and procedures, no matter how well designed andoperated, can provide only reasonable assurance of achieving the desiredcontrol objectives, as they are designed to do, and management necessarily wasrequired to apply its judgment in evaluating the cost-benefit relationship ofpossible controls and procedures.

Inconnection with the preparation of this Quarterly Report on Form 10-Q, as ofMarch 31, 2007, an evaluation was performed under the supervision and with theparticipation of the Company’s management, including the CEO and CFO, of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based onour assessment and those criteria, management believes that the Companymaintained effective internal control over financial reporting as of March 31,2007.

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#### ***Changes in Internal Controlover Financial Reporting***

There were no changes in the Company’s internalcontrol over financial reporting for the three months ended March 31, 2007 thathas materially affected, or is reasonably likely to materially affect, theCompany’s internal control over financial reporting.

**PART II — OTHER INFORMATION**

**Item 1A.****Risk Factors**

Inaddition to the other information set forth in this report, you shouldcarefully consider the factors discussed in Part I, “Item 1A. Risk Factors” inthe Annual Report on Form 10-K for the year ended December 31, 2006, whichcould materially affect the Company’s business, financial condition or futureresults. The risks described in the Company’s Annual Report on Form 10-K arenot the only risks facing the Company. Additional risks and uncertainties notcurrently known to the Company or that the Company currently deems to beimmaterial also may materially adversely affect the Company’s business,financial condition and/or operating results. There have been no materialchanges from the risk factors disclosed in the “Risk Factors” section of the Company’sAnnual Report on Form 10-K for the year ended December 31, 2006.

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

a)                                      The annual meeting of the shareholders ofNational R.V. Holdings, Inc. was held on January 31, 2007.

b)                                     The following nominees were elected Directorsfor three-year terms expiring in 2009.

c)                                      The tabulation of votes for each Directornominee was as follows:

|                 | ** ** | **For**   | ** ** | **Withheld** | ** ** |
|-----------------|------------|-----------|------------|--------------|------------|
| Doy B. Henley   |       | 6,431,169 |       | 2,740,781    |       |
| James B. Roszak |       | 6,107,069 |       | 3,064,881    |       |

 

d)                                     The terms of office of the followingdirectors continued after the meeting:

BradleyC. Albrechtsen, David J. Humphreys, Gregory McCaffery

e)                                      To ratify and approve the selection by theBoard of Directors of Swenson Advisors, LLP, as the Company’s independentpublic accountants for the fiscal year ending December 31, 2006.

| For     |   | 8,686,794 |   |
|---------|--------|-----------|--------|
| Against |   | 484,481   |   |
| Abstain |   | 675       |   |

 

**Item 6.****Exhibits**

Exhibits

31.1                                       Certificationof Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the ExchangeAct.

31.2                                       Certificationof Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the ExchangeAct.

32.1                                       Certificationpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002.

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**SIGNATURE**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.
|                    | **NATIONAL  R.V. HOLDINGS, INC.** |
|--------------------|-----------------------------------|
|               |                              | (Registrant) |   |
|               |                              |
| Date: May 14, 2007 | By                                | /s/ Thomas J. Martini |
|               |                              |
|               | Thomas J. Martini                 |
|               | Chief Financial Officer           |
|               | (Principal Accounting and         |
|               | Financial  Officer)               |
|                    |                                   |  |  |  |

 

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