**Table of Contents**

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-Q/A**

**AmendmentNo.1**

**(Mark One)**

**x QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

**For the quarterly period ended September 30,2005**

**o TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

**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)               |   |                                  |
|                                          |   |                                  |
| **3411 N.  Perris Blvd., Perris, California** |   | **92571**                             |
| (Address of  principal executive offices)     |   | (Zip Code)                            |

Registrant’s telephone number, including area code: **(951) 943-6007**

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 thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

YES x   NO o

Indicate by check markwhether the registrant is an accelerated filer.

YES x   NO o

Indicate by check mark whether the registrant is a shellcompany (as defined in Exchange Act Rule 12b-2 of the ExchangeAct). 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 November 1, 2005** | ** ** |
|--------------------------|------------|---------------------------------------------------------|------------|
| Common stock,  par value |       | 10,339,484                                              |       |
| $0.01 per share          |       |                                                    |       |

 

 

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****EXPLANATORYNOTE****

ThisAmendment No. 1 on Form 10-Q/A (“Form 10-Q/A”) amends andrestates the Company’s Quarterly Report on Form 10-Q for the three andnine months ended September 30, 2005, as initially filed with the Securitiesand Exchange Commission (the “SEC”) on November 8, 2005 (the “OriginalForm 10-Q”). This Form 10-Q/A is being filed to restate theconsolidated statements of operations for the three and nine months endedSeptember 30, 2004, to restate the consolidated statement of cash flows for thenine months ended September 30, 2004 and to restate the consolidated balancesheets as of September 30, 2005 and as of December 31, 2004 as describedunder the heading “Restatement” below. This restatement has previously beenreflected in the Company’s 2004 Form 10-K/A filed on March 21, 2006and its 2005 Form 10-K filed on March 30, 2006.

Restatement

TheCompany is restating the consolidated statements of operations for the threeand nine months ended September 30, 2004, restating the consolidated statementof cash flows for the nine months ended September 30, 2004 and restating theconsolidated balance sheets as of September 30, 2005 and as ofDecember 31, 2004 for the correction of accounting for the amortization ofcertain leasehold improvements. Statement of Financial Accounting Standards(SFAS) No. 13, “Accounting for Leases,” as further clarified by EmergingIssues Task Force (EITF) No. 05-6, “Determining the Amortization Period ofLeasehold Improvements,” requires that leasehold improvements by the lessee beamortized over the shorter of their estimated useful lives or the lease term.With respect to one of the Company’s leased properties, the Company amortizedcertain leasehold improvements over a period that exceeded the lease term. Theuse of the incorrect amortization period on these leasehold improvements causeda cumulative understatement of leasehold amortization expense of $0.41 millionat December 31, 2004. Although this error was not material to anyindividual prior period, the cumulative adjustment to correct the error wouldbe material to the quarter in which it were to be corrected. Accordingly, theCompany has concluded to restate prior periods to correct this error. As aresult of this restatement, the restated cost of goods sold, selling andgeneral and administrative combined expense was increased by $0.02 million and$0.05 million for the three and nine months ended September 30, 2004,respectively. This restatement is in addition to the prior restatementreflected in the Company’s Original Form 10-Q filed with the SEC onNovember 8, 2005.

**Changes Reflected in this Form 10-Q/A**

**As a result of the restatement, the disclosures in thefollowing items related to the three and nine months ended September 30, 2005and 2004 and the year ended December 31, 2004 have been revised:**

**Part I, Item 1 – Consolidated Financial Statements andNotes to Consolidated Financial Statements**

**·**                    Consolidated Financial Statements

**·**                     Note 1 – Basis of Presentation (History of RecentLosses section)

**·**                     Note 2 – Restatement of a Prior Period

**·**                     Note 7 – Stock-Based Compensation

**·**                    Note 10 – Earnings (Loss) Per Share

**Part I, Item 2 – Management’s Discussion and Analysisof Financial Condition and Results of Operations**

**·**                     Restatement of Financial Statements

**·**                     Executive Overview

**·**                    Results of Operations

**·**                    Liquidity and Capital Resources

**Part I, Item 4 – Controls and Procedures**

**Part II, Item 6 – Exhibits**

Except for the foregoing restatement, this Form 10-Q/A continuesto describe conditions as presented in the Original Form 10-Q. Except inthe sections identified above, this Form 10-Q/A does not reflect eventsoccurring after the filing of the Original Form 10-Q, or modify or updatethose disclosures, including exhibits to the Form 10-Q affected bysubsequent events. Information not affected by the restatement is unchanged andreflects the disclosures made at the time of the Original Form 10-Q.Accordingly, this Form 10-Q/A should be read in conjunction with filingsmade with the SEC subsequent to the filing of the Original Form 10-Q,including any amendments to those filings.

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**Table of Contents**

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

**INDEX**
| **PART I – FINANCIAL  INFORMATION** |
|-----------------------------------------------|
|                                          |   |   |
| Item 1.                                       | Financial Statements (Unaudited)  Consolidated Balance Sheets  September 30, 2005 and December 31, 2004 (Restated) |   |
|                                          |   |   |
|                                          | Consolidated Statements of Operations  Three and Nine Months Ended September 30, 2005 and 2004 (Restated) |   |
|                                          |   |   |
|                                          | Consolidated Statements of Cash Flows  Nine Months Ended September 30, 2005 and 2004 (Restated) |   |
|                                          |   |   |
|                                          | 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 6.                                       | Exhibits |   |
|                                          |   |   |
|                                          | Signature |   |

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**PART I, ITEM 1**

**Consolidated Financial Statements**

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

**CONSOLIDATED BALANCE SHEETS**

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

**(Unaudited)**
| ** **                                                                                                                    | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                    | ** ** | **(Restated)**               | ** ** | **(Restated)**              | ** ** |
|                                                                                                                          |       |                         |       |                        |       |
| ASSETS                                                                                                                        |       |                         |       |                        |       |
| Current assets:                                                                                                               |       |                         |       |                        |       |
| Cash and cash equivalents                                                                                                     |       | $                            | 11         |                        | $          | 11 |   |
| Restricted cash                                                                                                               |       | 25                           |       | 251                         |       |
| Receivables, less allowance for doubtful accounts of  $250 and $137, respectively                                             |       | 22,902                       |       | 19,976                      |       |
| Inventories                                                                                                                   |       | 76,956                       |       | 74,826                      |       |
| Deferred income taxes                                                                                                         |       | 1,005                        |       | 1,291                       |       |
| Note receivable                                                                                                               |       | 243                          |       | 2,213                       |       |
| Prepaid expenses                                                                                                              |       | 2,363                        |       | 2,924                       |       |
| Total current assets                                                                                                          |       | 103,505                      |       | 101,492                     |       |
| Property, plant and equipment, net                                                                                            |       | 38,612                       |       | 37,403                      |       |
| Other assets                                                                                                                  |       | 1,411                        |       | 1,338                       |       |
|                                                                                                                          |       | $                            | 143,528    |                        | $          | 140,233 |   |
|                                                                                                                          |       |                         |       |                        |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                    |       |                         |       |                        |       |
| Current  liabilities:                                                                                                         |       |                         |       |                        |       |
| Accounts payable                                                                                                              |       | $                            | 17,410     |                        | $          | 16,612 |   |
| Accrued expenses                                                                                                              |       | 25,051                       |       | 22,242                      |       |
| Line of credit                                                                                                                |       | 22,134                       |       | 12,690                      |       |
| Book overdraft                                                                                                                |       | 5,010                        |       | 803                         |       |
| Current portion of capital leases                                                                                             |       | 51                           |       | 51                          |       |
| Total current liabilities                                                                                                     |       | 69,656                       |       | 52,398                      |       |
| Long-term accrued expenses                                                                                                    |       | 6,084                        |       | 7,069                       |       |
| Deferred income taxes                                                                                                         |       | 1,005                        |       | 1,291                       |       |
| Long-term portion of capital leases                                                                                           |       | 161                          |       | 185                         |       |
| Total liabilities                                                                                                             |       | 76,906                       |       | 60,943                      |       |
|                                                                                                                          |       |                         |       |                        |       |
| Commitments and  contingent liabilities (Note 6)                                                                              |       |                         |       |                        |       |
|                                                                                                                          |       |                         |       |                        |       |
| Stockholders’  equity:                                                                                                   |       |                         |       |                        |       |
| Preferred stock - $0.01 par value; 5,000 shares  authorized, 4,000 issued and outstanding                                     |       | —                       |       | —                      |       |
| Common stock - $0.01 par value; 25,000,000 shares  authorized, 10,339,484 and 10,302,109 issued and outstanding, respectively |       | 103                          |       | 103                         |       |
| Additional paid-in capital                                                                                                    |       | 37,563                       |       | 37,423                      |       |
| Retained earnings                                                                                                             |       | 28,956                       |       | 41,764                      |       |
| Total stockholders’ equity                                                                                               |       | 66,622                       |       | 79,290                      |       |
|                                                                                                                          |       | $                            | 143,528    |                        | $          | 140,233 |   |

The accompanying notes are an integral part of the consolidatedfinancial statements.

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

**CONSOLIDATED STATEMENTS OF OPERATIONS**

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

**(Unaudited)**
| ** **                                                    | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                    | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                    | ** ** | ** **                                           | ** ** | **(Restated)**                                      | ** ** | ** ** | ** ** | **(Restated)** | ** ** |
|                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Net sales                                                     |       | $                                                    | 108,232    |                                                | $          | 112,525 |   | $ | 357,082 |   | $ | 334,953 |   |
| Cost of goods  sold                                           |       | 106,067                                              |       | 104,622                                             |       | 347,201 |   | 310,377 |   |
| Gross profit                                                  |       | 2,165                                                |       | 7,903                                               |       | 9,881 |   | 24,576 |   |
| Selling expenses                                              |       | 4,335                                                |       | 3,003                                               |       | 11,289 |   | 8,299 |   |
| General and  administrative expenses                          |       | 3,346                                                |       | 3,064                                               |       | 10,489 |   | 8,645 |   |
| Other expense                                                 |       | —                                               |       | 374                                                 |       | — |   | 374 |   |
| Operating income (loss)                                       |       | (5,516                                               | )          | 1,462                                               |       | (11,897 | ) | 7,258 |   |
| Interest expense                                              |       | 395                                                  |       | 52                                                  |       | 983 |   | 130 |   |
| Other expense  (income)                                       |       | 19                                                   |       | (25                                                 | )          | (72 | ) | (72 | ) |
| Income (loss) from continuing operations before  income taxes |       | (5,930                                               | )          | 1,435                                               |       | (12,808 | ) | 7,200 |   |
| Provision for  income taxes                                   |       | —                                               |       | 601                                                 |       | — |   | 2,818 |   |
| Income (loss) from continuing operations                      |       | (5,930                                               | )          | 834                                                 |       | (12,808 | ) | 4,382 |   |
| Loss from  discontinued operations                            |       | —                                               |       | 1,532                                               |       | — |   | 2,155 |   |
| Gain from sale  of discontinued operations                    |       | —                                               |       | (281                                                | )          | — |   | (281 | ) |
| Income taxes  related to discontinued operations              |       | —                                               |       | (524                                                | )          | — |   | (737 | ) |
| Loss from  discontinued operations, net of taxes              |       | —                                               |       | (727                                                | )          | — |   | (1,137 | ) |
| Net income  (loss)                                            |       | $                                                    | (5,930     | )                                                   | $          | 107 |   | $ | (12,808 | ) | $ | 3,245 |   |
|                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Basic earnings  (loss) per common share:                      |       |                                                 |       |                                                |       |   |   |   |   |
| Continuing operations                                         |       | $                                                    | (0.57      | )                                                   | $          | 0.08 |   | $ | (1.24 | ) | $ | 0.43 |   |
| Discontinued operations                                       |       | $                                                    | —     |                                                | $          | (0.07 | ) | $ | — |   | $ | (0.11 | ) |
| Total                                                         |       | $                                                    | (0.57      | )                                                   | $          | 0.01 |   | $ | (1.24 | ) | $ | 0.32 |   |
|                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Diluted earnings  (loss) per common share:                    |       |                                                 |       |                                                |       |   |   |   |   |
| Continuing operations                                         |       | $                                                    | (0.57      | )                                                   | $          | 0.08 |   | $ | (1.24 | ) | $ | 0.42 |   |
| Discontinued operations                                       |       | $                                                    | —     |                                                | $          | (0.07 | ) | $ | — |   | $ | (0.11 | ) |
| Total                                                         |       | $                                                    | (0.57      | )                                                   | $          | 0.01 |   | $ | (1.24 | ) | $ | 0.31 |   |
|                                                          |       |                                                 |       |                                                |       |   |   |   |   |
| Weighted average  number of shares:                           |       |                                                 |       |                                                |       |   |   |   |   |
| Basic                                                         |       | 10,339                                               |       | 10,222                                              |       | 10,338 |   | 10,203 |   |
| Diluted                                                       |       | 10,339                                               |       | 10,426                                              |       | 10,338 |   | 10,392 |   |

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)**
| ** **                                                                            | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                            | ** ** | **2005**                                            | ** ** | **2004** | ** ** |
| ** **                                                                            | ** ** | ** **                                          | ** ** | **(Restated)** | ** ** |
| Cash flows from  operating activities:                                                |       |                                                |       |   |   |
| Net income (loss)                                                                     |       | $                                                   | (12,808    | ) | $ | 3,245 |   |
| Adjustments to reconcile net income (loss) to net  cash used in operating activities: |       |                                                |       |   |   |
| Depreciation and amortization                                                         |       | 2,760                                               |       | 2,926 |   |
| Bad debt expense (recovery)                                                           |       | 126                                                 |       | (1 | ) |
| Reserve and write down of inventories                                                 |       | 2,630                                               |       | 1,764 |   |
| Loss (gain) on asset disposal                                                         |       | (35                                                 | )          | 61 |   |
| Deferred income tax provision                                                         |       | —                                              |       | 1,880 |   |
| Changes in assets and liabilities:                                                    |       |                                                |       |   |   |
| Decrease in restricted cash                                                           |       | 226                                                 |       | — |   |
| Increase in receivables                                                               |       | (3,052                                              | )          | (2,500 | ) |
| Increase in inventories                                                               |       | (5,154                                              | )          | (25,821 | ) |
| Decrease (increase) in prepaid expenses                                               |       | 641                                                 |       | (1,612 | ) |
| Increase in accounts payable                                                          |       | 798                                                 |       | 8,209 |   |
| Increase in accrued expenses                                                          |       | 1,824                                               |       | 874 |   |
|                                                                                  |       |                                                |       |   |   |
| Net cash used in operating activities                                                 |       | (12,044                                             | )          | (10,975 | ) |
|                                                                                  |       |                                                |       |   |   |
| Cash flows from  investing activities:                                                |       |                                                |       |   |   |
| Decrease in other assets                                                              |       | 45                                                  |       | 10 |   |
| Repayments on note receivable                                                         |       | 1,970                                               |       | — |   |
| Proceeds from sale of assets                                                          |       | 75                                                  |       | 1,932 |   |
| Proceeds from sale of discontinued operations                                         |       | —                                              |       | 500 |   |
| Purchase of property, plant and equipment                                             |       | (3,577                                              | )          | (3,372 | ) |
|                                                                                  |       |                                                |       |   |   |
| Net cash used in investing activities                                                 |       | (1,487                                              | )          | (930 | ) |
|                                                                                  |       |                                                |       |   |   |
| Cash flows from  financing activities:                                                |       |                                                |       |   |   |
| Net advances on line of credit                                                        |       | 9,444                                               |       | 2,150 |   |
| Deferred financing costs                                                              |       | (236                                                | )          | — |   |
| Increase in book overdraft                                                            |       | 4,207                                               |       | 7,228 |   |
| Principal payments on capital leases                                                  |       | (24                                                 | )          | — |   |
| Principal payments on long-term debt                                                  |       | —                                              |       | (18 | ) |
| Proceeds from issuance of common stock                                                |       | 140                                                 |       | 497 |   |
|                                                                                  |       |                                                |       |   |   |
| Net cash provided by financing activities                                             |       | 13,531                                              |       | 9,857 |   |
| Net decrease in  cash and cash equivalents                                            |       | —                                              |       | (2,048 | ) |
| Cash and cash  equivalents, beginning of the year                                     |       | 11                                                  |       | 2,059 |   |
| Cash and cash  equivalents, end of period                                             |       | $                                                   | 11         |   | $ | 11 |   |
|                                                                                  |       |                                                |       |   |   |
| Supplementary  cash flow information:                                                 |       |                                                |       |   |   |
| Reclassification of  inventory for operating lease                                    |       | $                                                   | 394        |   | $ | — |   |

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

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

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)**

**NOTE 1 – BASIS OF PRESENTATION**

**General**

The consolidatedfinancial statements include the financial statements of National RVHoldings, Inc. (the “Company”) and its wholly-owned subsidiaries NationalRV, Inc. (“National RV”) and Country Coach, Inc. (“Country Coach”).As further discussed in Note 9, the operating results of the Travel Trailerdivision have been reclassified as a discontinued operation for the priorperiods.

The accompanyingunaudited consolidated financial statements have been prepared in accordancewith the instructions to Form 10-Q and do not include all of theinformation and footnotes required by accounting principles generally acceptedin the United States of America for complete consolidated financial statements.These consolidated financial statements should be read in conjunction with theaudited consolidated financial statements for the year ended December 31,2004 and notes thereto included in the Company’s Annual Report onForm 10-K/A filed with the Securities and Exchange Commission on March 21,2006.

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

***SeasonalNature of Business Activities***

Results for the interimperiod are not necessarily indicative of the results for an entire year.Seasonal factors, over which the Company has no control, have an effect on thedemand for the Company’s products. Demand in the RV industry characteristicallydeclines over the winter season, while sales are generally highest during thespring and summer months.

***Use of Accounting Estimates***

The preparation ofthe consolidated financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and judgments that affect the reported amount of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe consolidated financial statements and the reported amount of revenues andexpenses for each period. On an on-going basis, management evaluates itsestimates and judgments. Management bases its estimates and judgments onhistorical experience and on various other factors that are believed to bereasonable under the circumstances, the results of which form the basis formaking judgments about the carrying value of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions.

***History of Recent Losses***

The Company experienced net losses for the nine-monthperiod ended September 30, 2005 of $12.8 million compared to net income of $3.2million during the same period last year. The Company used cash in operating activities for the nine-month periodsended September 30, 2005 and 2004 of $12.0 million and $11.0 million,respectively.

The Company has incurred net losses of $9.5 millionand $8.5 million for the years ended December 31, 2004 and 2003,respectively.  The Company used cash fromoperating activities of $15.8 million for the year ended December 31, 2004and provided cash from operating activities of $8.4 million for the year endedDecember 31, 2003.  The RV industryhas been historically cyclical and subject to downturns during periods of weakeconomic conditions.  With rising fuelprices and continued economic uncertainty, the Company experienced a furtherdecline in demand for its products in 2005. These conditions led the Company to assess its short-term liquidityneeds and plans to achieve profitability.

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

In order to fundon-going operations in the short-term, the Company remains dependent upon itsability to utilize outside financing through borrowings on its line of credituntil it achieves sustained operational profitability through a combination ofincreased sales, cost reductions and improved product margins.  After consideration of the restrictions ofthe borrowing capacity noted in Note 5, the Company believes it has sufficientfinancial resources to fund its operations in the short-term.  However, the Company’s ability to meet itsobligations in the long-term is dependent on its ability to generate positive cashflows from operations and is dependent on continued borrowings under its lineof credit.  If management is unable toachieve its operational profitability plan or if unforeseen events occur andthe Company’s existing line of credit is insufficient to allow the Company tomeet its obligations, the Company may need to implement alternative plans thatcould include long-term financing collateralized by real estate (which ispresently unencumbered) or obtaining additional debt financing, additionalreductions in operating costs, deferral of capital expenditures and furtherreductions in working capital.  While theCompany believes that it could successfully complete the alternative plans, ifnecessary, there can be no assurance that such alternatives would be availableon acceptable terms and conditions or that the Company would be successful inits implementation of such plans.

**NOTE 2 – RESTATEMENT OF A PRIORPERIOD**

##### The consolidated financialstatements have been restated to correct an error related to the amortizationof leasehold improvements. Emerging Issues Task Force (EITF) No. 05-6, “Determiningthe Amortization Period of Leasehold Improvements,” requires that leaseholdimprovements by the lessee be amortized over the shorter of their estimateduseful lives or the lease term. With respect to one of the Company’s leasedproperties, the Company amortized certain leasehold improvements over a periodthat exceeded the lease term. The use of the incorrect amortization period forthese leasehold improvements caused a cumulative understatement of leaseholdamortization expense of $0.41 million at December 31, 2004. As a result ofthis restatement, the restated cost of goods sold, selling and general andadministrative combined expense was increased by $0.02 million and $0.05million for the three and nine months ended September 30, 2004, respectively.The restatement had no impact on previously reported basic and diluted earningsper share. (In addition to the restatement described above, the “As Reported”columns for the three and nine month periods ended September 30, 2004 includerestatements previously described in the Company’s Original Form 10-Q filedwith the SEC on November 8, 2005.)

The following table presents the effect of changes inthe unaudited consolidated financial statements caused by the restatement (inthousands):

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**Statements of Operations**
| ** **                                             | ** ** | **Three Months Ended  September 30, 2004** | ** ** | **Nine Months Ended  September 30, 2004** | ** ** |
|--------------------------------------------------------|------------|----------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                             | ** ** | **As Reported**                                           | ** ** | **As Restated   for  Correction  of Error**    | ** ** | **As Reported** | ** ** | **As Restated   for  Correction  of Error** | ** ** |
| Cost of goods sold                                     |       | $                                                              | 104,606    |                                                          | $          | 104,622 |   | $ | 310,336 |   | $ | 310,377 |   |
| Gross profit                                           |       | $                                                              | 7,919      |                                                          | $          | 7,903 |   | $ | 24,617 |   | $ | 24,576 |   |
| Selling expenses                                       |       | $                                                              | 3,003      |                                                          | $          | 3,003 |   | $ | 8,298 |   | $ | 8,299 |   |
| General and  administrative expenses                   |       | $                                                              | 3,063      |                                                          | $          | 3,064 |   | $ | 8,642 |   | $ | 8,645 |   |
| Operating income                                       |       | $                                                              | 1,479      |                                                          | $          | 1,462 |   | $ | 7,303 |   | $ | 7,258 |   |
| Income from continuing  operations before income taxes |       | $                                                              | 1,452      |                                                          | $          | 1,435 |   | $ | 7,245 |   | $ | 7,200 |   |
| Provision for income  taxes                            |       | $                                                              | 608        |                                                          | $          | 601 |   | $ | 2,835 |   | $ | 2,818 |   |
| Income from continuing  operations                     |       | $                                                              | 844        |                                                          | $          | 834 |   | $ | 4,410 |   | $ | 4,382 |   |
| Net income                                             |       | $                                                              | 117        |                                                          | $          | 107 |   | $ | 3,273 |   | $ | 3,245 |   |

**Statementof Cash Flows**
|                                | ** ** | **Nine Months Ended  September 30, 2004** | ** ** |
|--------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                     | ** ** | **As Reported**                                          | ** ** | **As Restated  for Correction  of Error** | ** ** |
| Net income                     |       | $                                                             | 3,273      |   | $ | 3,245 |   |
| Depreciation and  amortization |       | $                                                             | 2,881      |   | $ | 2,926 |   |
| Deferred income tax  provision |       | $                                                             | 1,897      |   | $ | 1,880 |   |

**BalanceSheets**
| ** **                                      | ** ** | **September 30, 2005** | ** ** | **December 31, 2004**                          | ** ** |
|-------------------------------------------------|------------|----------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                      | ** ** | **As Reported**             | ** ** | **As Restated  for Correction  of Error** | ** ** | **As Reported** | ** ** | **As Restated  for Correction  of Error** | ** ** |
| Deferred income taxes                           |       | $                                | 1,008      |                                                     | $          | 1,005 |   | $ | 1,294 |   | $ | 1,291 |   |
| Total current assets                            |       | $                                | 103,508    |                                                     | $          | 103,505 |   | $ | 101,495 |   | $ | 101,492 |   |
| Property, plant and  equipment, net             |       | $                                | 39,018     |                                                     | $          | 38,612 |   | $ | 37,809 |   | $ | 37,403 |   |
| Total assets                                    |       | $                                | 143,937    |                                                     | $          | 143,528 |   | $ | 140,642 |   | $ | 140,233 |   |
| Deferred income taxes  (long-term liabilities)  |       | $                                | 1,008      |                                                     | $          | 1,005 |   | $ | 1,294 |   | $ | 1,291 |   |
| Total liabilities                               |       | $                                | 76,909     |                                                     | $          | 76,906 |   | $ | 60,946 |   | $ | 60,943 |   |
| Retained earnings                               |       | $                                | 29,362     |                                                     | $          | 28,956 |   | $ | 42,170 |   | $ | 41,764 |   |
| Total stockholders’  equity                |       | $                                | 67,028     |                                                     | $          | 66,622 |   | $ | 79,696 |   | $ | 79,290 |   |
| Total liabilities and stockholders’ equity |       | $                                | 143,937    |                                                     | $          | 143,528 |   | $ | 140,642 |   | $ | 140,233 |   |

**NOTE 3 –RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**

In November 2004, the Financial AccountingStandards Board (FASB) issued Statement of Financial Accounting Standards(SFAS) No. 151, “Inventory Costs-an Amendment of ARB No. 43, Chapter4.” SFAS No. 151 requires that accounting for items such as idle facilityexpense, freight, handling costs, and wasted materials (spoilage) be recognizedas current period charges regardless of whether they meet the criterion of “soabnormal.” In addition, this statement requires that allocation of fixedproduction overheads to the costs of conversion be based on the normal capacityof the production facilities. This statement is effective for inventory costsincurred during fiscal years beginning after June 15, 2005. The provisionof this statement shall be applied prospectively. The Company has notdetermined the impact that adoption of this standard will have on itsconsolidated financial statements.

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In December 2004,the FASB issued FASB Staff Position (FSP) 109-1, “Application of FASB StatementNo. 109, Accounting for Income Taxes, to the Tax Deduction on QualifiedProduction Activities Provided by the American Jobs Creation Act of 2004.” TheAmerican Jobs Creation Act, or AJCA, introduces a special 9% tax deduction onqualified production activities. FSP 109-1 clarifies that this tax deductionshould be accounted for as a special tax deduction in accordance with SFAS No.109, “Accounting for Income Taxes.” FSP 109-1 is effective upon its issuance.The adoption of FSP 109-1 did not have a material impact on the Company’sconsolidated financial statements.

InDecember 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-BasedPayment” (SFAS No. 123R), which replaces SFAS No. 123, “Accountingfor Stock-Based Compensation,” (SFAS No. 123) and supercedes APB OpinionNo. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123Rrequires all share-based payments to employees, including grants of employeestock options, to be recognized in the financial statements based on their fairvalues beginning with the first annual period after June 15, 2005, withearly adoption encouraged. The pro forma disclosures previously permitted underSFAS No. 123 no longer will be an alternative to financial statementrecognition. The Company is required to adopt SFAS No. 123R in the firstcalendar quarter of 2006, beginning January 1, 2006. Under SFASNo. 123R, the Company must determine the appropriate fair value model tobe used for valuing share-based payments, the amortization method forcompensation cost and the transition method to be used at date of adoption. Thetransition methods include modified prospective and modified retrospectiveadoption options. Under the modified retrospective option, prior periods may berestated either as of the beginning of the year of adoption or for all periodspresented. The modified prospective method requires that compensation expensebe recorded for all unvested stock options and restricted stock at thebeginning of the first quarter of adoption of SFAS No. 123R, while the modifiedretrospective method would record compensation expense for all unvested stockoptions and restricted stock beginning with the first period restated. TheCompany is evaluating the requirements of SFAS No. 123R. The Company hasnot yet determined the method of adoption or the affect of adopting SFASNo. 123R, and the Company has not determined whether the adoption willresult in amounts that are similar to the current pro forma disclosures underSFAS No. 123 and SFAS No. 148, “Accounting for Stock-Based Compensation -Transition and Disclosure” (SFAS No. 148).

In June 2005, theFASB issued SFAS No. 154, “Accounting Changes and Error Corrections–areplacement of APB No. 20 and FAS No. 3” (“SFAS No. 154”). SFAS No.154 provides guidance on the accounting for, and reporting of, accountingchanges and error corrections. It establishes, unless impracticable,retrospective application as the required method for reporting a change inaccounting principle in the absence of explicit transition requirementsspecific to the newly adopted accounting principle. SFAS No. 154 also providesguidance for determining whether retrospective application of a change inaccounting principle is impracticable and for reporting a change whenretrospective application is impracticable. The correction of an error inpreviously issued financial statements is not an accounting change. However,the reporting of an error correction involves adjustments to previously issuedfinancial statements similar to those generally applicable to reporting anaccounting change retrospectively. Therefore, the reporting of a correction ofan error by restating previously issued financial statements is also addressedby SFAS No. 154. SFAS No. 154 is required to be adopted in fiscal yearsbeginning after December 15, 2005. The Company does not believe thatadoption of this standard will have an impact on its consolidated financialstatements.

In August 2005, the FASBissued FSP 123-1, “Classification and Measurement of Freestanding FinancialInstruments Originally Issued in Exchange for Employee Services under SFAS No.123R.” In this FSP, the FASB decided to defer the requirements in SFAS No. 123Rthat make a freestanding financial instrument subject to the recognition andmeasurement requirements of other generally accepted accounting principles (“GAAP”)when the rights conveyed by the instrument are no longer dependent on theholder being an employee. The guidance in this FSP should be applied uponinitial adoption of SFAS No. 123R. The Company is evaluating the requirementsof SFAS No. 123R. The Company has not yet determined the method of adoption orthe affect of adopting SFAS No. 123R, and the Company has not determinedwhether the adoption will result in amounts that are similar to the current proforma disclosures under SFAS Nos. 123 and 148.

**NOTE 4 – SUPPLEMENTAL BALANCESHEET INFORMATION**

Inventoriesconsist of the following (in thousands):

|                   | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------|------------|------------------------------|------------|-----------------------------|------------|
| Finished goods    |       | $                            | 16,692     |                        | $          | 16,379 |   |
| Work-in-process   |       | 32,843                       |       | 35,388                      |       |
| Raw materials     |       | 19,620                       |       | 18,398                      |       |
| Chassis           |       | 7,801                        |       | 4,661                       |       |
| Total inventories |       | $                            | 76,956     |                        | $          | 74,826 |   |

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Accrued expenses consistof the following (in thousands):

|                                                    | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|----------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
|                                               |       |                         |       |                        |       |
| Current accrued  expenses:                         |       |                         |       |                        |       |
| Workers’ compensation  self-insurance reserve |       | $                            | 2,595      |                        | $          | 2,720 |   |
| Warranty reserve                                   |       | 9,981                        |       | 8,330                       |       |
| Payroll and other  accrued expenses                |       | 12,475                       |       | 11,192                      |       |
| Total current  accrued expenses                    |       | $                            | 25,051     |                        | $          | 22,242 |   |
|                                               |       |                         |       |                        |       |
| Long-term accrued  expenses:                       |       |                         |       |                        |       |
| Workers’ compensation  self-insurance reserve |       | $                            | 5,295      |                        | $          | 6,151 |   |
| Warranty reserve                                   |       | 133                          |       | 175                         |       |
| Deferred compensation                              |       | 656                          |       | 743                         |       |
| Total long-term accrued  expenses                  |       | $                            | 6,084      |                        | $          | 7,069 |   |

 

**NOTE 5 – CREDIT FACILITY**

On August 12, 2005,the Company entered into a new three-year asset-based revolving credit facilitywith UPS Capital Corporation (“UPSC”) and Wells Fargo Bank for $25 million,with the Company having the option, subject to certain conditions, ofincreasing the revolver in $5 million increments up to a total credit facilityof $40 million. On September 29, 2005, the Company affected such anincrease in the amount of the credit facility from $25 million to $30 million.The credit facility is collateralized by all of the Company’s assets other thanreal estate. Borrowing availability is based on eligible accounts receivableand inventory. The facility also includes a requirement to maintain a blockedaccount arrangement, whereby remittances from the Company’s customers reducethe debt outstanding. The credit facility contains, among other provisions,certain financial covenants, including funded debt to EBITDA, and a fixedcharge coverage ratio. If these financial covenants are not met, the Company’savailability under the credit facility will be reduced. The Company did not meet these financial covenants as of September 30,2005, and currently does not expect to until September 30, 2006.  Until these covenants are met, the Company’sborrowing availability under its $40 million facility is limited to an amountbetween $27 million to $32 million, depending on eligible inventory andaccounts receivable. Initial amounts borrowed under the revolving creditfacility bear interest at the prime rate listed in the Wall Street Journal plus0.50 percentage points and may be subsequently adjusted down based on atrailing twelve month funded debt to EBITDA calculation.

At September 30, 2005 andDecember 31, 2004, the Company had outstanding loans under its line ofcredit then in effect totaling $22.1 million and $12.7 million, respectively.At September 30, 2005, the interest rate on the outstanding borrowings underthe line of credit was 7.25%. The weighted average interest rate for theborrowings under the line of credit during the nine-month period endedSeptember 30, 2005 and 2004 was 6.56% and 5.01%, respectively.

**NOTE 6 – COMMITMENTS ANDCONTINGENCIES**

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 is typically18 months or less. The Company’s maximum potential exposure under theseagreements approximated $169 million at September 30, 2005. 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 operations,or cash flows; consequently, no liability has been recognized in theconsolidated financial statements.

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The Company is involvedin legal proceedings in the ordinary course of business, including a variety ofwarranty, “lemon law” and product liability claims typical in the recreationvehicle industry. With respect to product liability claims, the Company’sinsurance policies cover, in whole or in part, defense costs and liabilitycosts for personal injury or property damage (excluding damage to Companymotorhomes). While it is not possible to estimate with certainty the ultimatelegal and financial liability with respect to this litigation, management is ofthe opinion that while the final resolution of any such litigation may have animpact on the Company’s consolidated results for a particular reporting period,the ultimate disposition of such litigation should not have a material adverseeffect on the Company’s financial position, results of operations or liquidity.

The Company’s warranty reserve is established based onits best estimate of the amounts necessary to settle future and existing claimson products sold as of the balance sheet date. The Company records an estimatefor future warranty-related costs based on recent actual warranty claims. Also,as part of the warranty reserve the Company’s recall reserve is established, asnecessary, based on management’s estimate of the cost per unit to remedy theproblem and the estimated number of units that will ultimately be brought infor the repair.

Nine Months Ended September 30, 2005 (in thousands)
|                  | ** ** | **Beginning  Balance** | ** ** | **Additions** | ** ** | **Deductions** | ** ** | **Ending  Balance** | ** ** |
|------------------|------------|------------------------|------------|---------------|------------|----------------|------------|---------------------|------------|
| Warranty reserve |       | $                      | 8,505      |          | $          | 13,228         |       | $                   | 11,619     |   | $ | 10,114 |   |
|                  |            |                        |            |               |            |                |            |                     |            |  |  |  |  |

In August 2004, the Company entered into an agreement to acquire,for $3 million, approximately 73 acres of land adjacent to its Country Coach, Inc.facility in Junction City, Oregon. The Company paid a deposit of $0.1 million.The closing of the purchase is subject to customary closing conditions and isexpected to occur in 2006.

**NOTE 7 – STOCK-BASED COMPENSATION**

The Company has stock option plans that enable it tooffer equity participation to employees, officers, and directors as well ascertain non-employees. Stock options may be granted as incentive ornonqualified options. The Company has four fixed option plans that reserveshares of common stock for issuance to executives, key employees, consultants,and directors. The Company has also issued fixed options outside of such planspursuant to individual stock option agreements. Options granted to non-employeedirectors generally vest immediately upon grant and expire five to ten yearsfrom the date of grant. Options granted to employees, including employeedirectors, generally vest in three equal annual installments and expire five toten years from the date of grant. The price of the options granted pursuant tothese plans will not be less than 100 percent of the market value of the shareson the date of grant.

The Company has adopted the provisions of Statement ofFinancial Accounting Standards No. 148, “Accounting for Stock-BasedCompensation - Transition and Disclosure” (SFAS No. 148), which amends SFAS No.123, “Accounting for Stock-Based Compensation.” As permitted by SFAS No. 148,the Company continues to measure compensation cost in accordance withAccounting Principles Board Opinion No. 25, “Accounting for Stock Issuedto Employees” (APB No. 25) and related interpretations, but provides pro formadisclosures of net loss and loss per share as if the fair-value method had beenapplied.

The following table illustrates the effect on net income(loss) and earnings (loss) per share if the Company had applied the fair valuerecognition provisions to stock-based employee compensation (in thousands,except per share amounts):

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| ** **                                                                                                                                 | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                                                 | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                                                                                 | ** ** | ** **                                           | ** ** | **(Restated)**                                      | ** ** | ** ** | ** ** | **(Restated)** | ** ** |
|                                                                                                                                       |       |                                                 |       |                                                |       |   |   |   |   |
| Income (loss) from  continuing operations                                                                                                  |       | $                                                    | (5,930     | )                                                   | $          | 834 |   | $ | (12,808 | ) | $ | 4,382 |   |
| Loss from discontinued  operations, net of taxes                                                                                           |       | —                                               |       | (727                                                | )          | — |   | (1,137 | ) |
| Net income (loss) - as  reported                                                                                                           |       | (5,930                                               | )          | 107                                                 |       | (12,808 | ) | 3,245 |   |
| Total  stock-based employee compensation expense determined under fair value  based method for all awards, net of related tax effects |       | 186                                                  |       | 138                                                 |       | 527 |   | 431 |   |
| Pro forma net income  (loss)                                                                                                               |       | $                                                    | (6,116     | )                                                   | $          | (31 | ) | $ | (13,335 | ) | $ | 2,814 |   |
|                                                                                                                                       |       |                                                 |       |                                                |       |   |   |   |   |
| Basic earnings (loss)  per share as reported                                                                                               |       |                                                 |       |                                                |       |   |   |   |   |
| Continuing  operations                                                                                                                     |       | $                                                    | (0.57      | )                                                   | $          | 0.08 |   | $ | (1.24 | ) | $ | 0.43 |   |
| Discontinued  operations                                                                                                                   |       | —                                               |       | (0.07                                               | )          | — |   | (0.11 | ) |
| Total basic  earnings (loss) per share                                                                                                     |       | (0.57                                                | )          | 0.01                                                |       | (1.24 | ) | 0.32 |   |
| Total  stock-based employee compensation expense determined under fair value based  method for all awards, net of related tax effects      |       | 0.02                                                 |       | 0.01                                                |       | 0.05 |   | 0.04 |   |
| Basic earnings (loss)  per share pro forma                                                                                                 |       | $                                                    | (0.59      | )                                                   | $          | — |   | $ | (1.29 | ) | $ | 0.28 |   |
|                                                                                                                                       |       |                                                 |       |                                                |       |   |   |   |   |
| Diluted earnings (loss)  per share as reported                                                                                             |       |                                                 |       |                                                |       |   |   |   |   |
| Continuing  operations                                                                                                                     |       | $                                                    | (0.57      | )                                                   | $          | 0.08 |   | $ | (1.24 | ) | $ | 0.42 |   |
| Discontinued  operations                                                                                                                   |       | —                                               |       | (0.07                                               | )          | — |   | (0.11 | ) |
| Total diluted  earnings (loss) per share                                                                                                   |       | (0.57                                                | )          | 0.01                                                |       | (1.24 | ) | 0.31 |   |
| Total  stock-based employee compensation expense determined under fair value based  method for all awards, net of related tax effects      |       | 0.02                                                 |       | 0.01                                                |       | 0.05 |   | 0.04 |   |
| Diluted earnings (loss) per share pro forma                                                                                                |       | $                                                    | (0.59      | )                                                   | $          | — |   | $ | (1.29 | ) | $ | 0.27 |   |

The weighted-average fairvalue of the stock options has been estimated on the date of grant using theBlack-Scholes option-pricing model. There were no new stock option grantsduring the nine-month period ended September 30, 2005. Additionally, therewere no stock options granted for the three-month period endedSeptember 30, 2004.

**NOTE 8 – INCOME TAXES**

As of September 30, 2005, the Company has a currentdeferred tax asset of $1.0 million and a long-term deferred tax liability of$1.0 million. During the three and nine-month periods ended September 30,2005, the Company recorded a non-cash charge of $2.5 million and $4.9 million,respectively, to increase the valuation allowance to offset the change in netdeferred tax assets.  Recent cumulativelosses, the downturn in current market conditions and its impact on near termearnings led the Company to conclude that it was more likely than not that itsrecorded net deferred tax asset will not be realized. The Company expects to recorda full valuation allowance on future tax benefits until it can sustain anappropriate level of profitability and until such time, the Company would notexpect to recognize any significant tax benefits in its future results ofoperations.

**NOTE 9 – DISCONTINUED OPERATIONS**

On September 24,2004, the Company sold its Travel Trailer business assets to Weekend Warrior, aprivately owned, California-based ramp-trailer manufacturer. The sale wasdesigned to allow the Company to further concentrate its efforts and resourceson its growing motorhome business. The total selling price of the business was$3.2 million. The sale included inventory totaling $2.8 million and equipmenttotaling $0.1 million. In addition, the Company recognized a $0.3 million gainon the sale. Weekend Warrior paid $0.5 million at closing with the balance tobe paid in ten equal monthly payments. Furthermore, a payment of 1% of monthlysales for other assets and trademarks will be made on a monthly basis over atwelve-month period ending October 10, 2005 with a minimum due of $0.3million which has been included in note receivable in the accompanyingconsolidated balance sheets. The Company also entered into a subleaseagreement, which

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allowed Weekend Warriorto lease a portion of the Company’s facilities for up to twelve months.  This sublease terminated in September 2005.Net sales from discontinued operations were $1.4 million and $14.7 million forthe three and nine-month periods ended September 30, 2004.

**NOTE 10 – EARNINGS (LOSS) PERSHARE**

Basic earnings(loss) per share is computed by dividing net earnings (loss) by the weightedaverage number of common shares outstanding for the period. Diluted earnings(loss) per share reflect the potential dilution that could occur if optionswere exercised or converted into common stock. Shares attributable to theexercise of outstanding options that are anti-dilutive are excluded from thecalculation of diluted loss per share.

All amounts in thousands except per share amounts.
| ** **                                          | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                          | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                          | ** ** | ** **                                           | ** ** | **(Restated)**                                      | ** ** | ** ** | ** ** | **(Restated)** | ** ** |
|                                                |       |                                                 |       |                                                |       |   |   |   |   |
| Income (loss) from  continuing operations           |       | $                                                    | (5,930     | )                                                   | $          | 834 |   | $ | (12,808 | ) | $ | 4,382 |   |
| Loss from discontinued  operations, net of taxes    |       | —                                               |       | (727                                                | )          | — |   | (1,137 | ) |
| Net income (loss)                                   |       | $                                                    | (5,930     | )                                                   | $          | 107 |   | $ | (12,808 | ) | $ | 3,245 |   |
|                                                |       |                                                 |       |                                                |       |   |   |   |   |
| Basic weighted average  common shares outstanding   |       | 10,339                                               |       | 10,222                                              |       | 10,338 |   | 10,203 |   |
| Effect of dilutive  stock options                   |       | —                                               |       | 204                                                 |       | — |   | 189 |   |
|                                                |       |                                                 |       |                                                |       |   |   |   |   |
| Diluted weighted  average common shares outstanding |       | 10,339                                               |       | 10,426                                              |       | 10,338 |   | 10,392 |   |
|                                                |       |                                                 |       |                                                |       |   |   |   |   |
| Basic earnings (loss)  per share:                   |       |                                                 |       |                                                |       |   |   |   |   |
| Continuing  operations                              |       | $                                                    | (0.57      | )                                                   | $          | 0.08 |   | $ | (1.24 | ) | $ | 0.43 |   |
| Discontinued  operations                            |       | —                                               |       | (0.07                                               | )          | — |   | (0.11 | ) |
| Total                                               |       | $                                                    | (0.57      | )                                                   | $          | 0.01 |   | $ | (1.24 | ) | $ | 0.32 |   |
|                                                |       |                                                 |       |                                                |       |   |   |   |   |
| Diluted earnings (loss)  per share:                 |       |                                                 |       |                                                |       |   |   |   |   |
| Continuing  operations                              |       | $                                                    | (0.57      | )                                                   | $          | 0.08 |   | $ | (1.24 | ) | $ | 0.42 |   |
| Discontinued  operations                            |       | —                                               |       | (0.07                                               | )          | — |   | (0.11 | ) |
| Total                                               |       | $                                                    | (0.57      | )                                                   | $          | 0.01 |   | $ | (1.24 | ) | $ | 0.31 |   |

For the three monthsended September 30, 2005 and 2004, excluded from the computation of dilutedearnings per share were stock options to purchase 931,796 shares and 12,000shares, respectively. For the nine months ended September 30, 2005 and2004, excluded from the computation of diluted earnings per share were stockoptions to purchase 931,796 and 12,000 shares, respectively.

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

**PART I, ITEM2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

**Disclosure Regarding ForwardLooking Statements**

This Quarterly Report onForm 10-Q/A contains forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995. Investors are cautioned thatforward-looking statements are inherently uncertain. Actual performance andresults may differ materially from that projected or suggested herein due tocertain risks and uncertainties including, without limitation, potentialfluctuations in the Company’s operating results; any material weaknesses in theCompany’s internal control over financial reporting or the failure to remediateany of the previously disclosed material weaknesses; any failure to implementrequired new or improved controls; resumption of losses; seasonality andeconomic conditions; dependence on certain dealers and concentration of dealersin certain regions; dependence on chassis suppliers; potential liabilitiesunder repurchase agreements; competition; government regulation; warrantyclaims; and product liability claims. Certain risks and uncertainties thatcould cause actual results to differ materially from that projected orsuggested are set forth in the Form 10-K, in the Company’s filings withthe Securities and Exchange Commission (the “SEC”) and the Company’s publicannouncements, copies of which are available from the SEC or from the Companyupon request. The Company undertakes no obligation to revise or update publiclyany forward-looking statements for any reason.

**Restatement of FinancialStatements**

The following discussionand analysis gives effect to the restatement described in Note 2 to theunaudited consolidated financial statements for the periods ended September 30,2005, December 31, 2004 and September 30, 2004 contained herein.  Accordingly, certain of the data set forth inthis section are not comparable to discussions and data in our previouslyfiled annual and quarterly reports for corresponding periods. (In addition to the restatementdescribed above, the “As Reported” columns for the three and nine month periodsended September 30, 2004 include restatements previously described in theCompany’s Original Form 10-Q filed with the SEC on November 8, 2005.)

The following table presents the effect of changes inthe unaudited consolidated financial statements caused by the restatement (inthousands):

**Statements of Operations**
| ** **                                             | ** ** | **Three Months Ended  September 30, 2004** | ** ** | **Nine Months Ended  September 30, 2004** | ** ** |
|--------------------------------------------------------|------------|----------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                             | ** ** | **As Reported**                                           | ** ** | **As Restated   for  Correction  of Error**    | ** ** | **As Reported** | ** ** | **As Restated   for  Correction  of Error** | ** ** |
| Cost of goods sold                                     |       | $                                                              | 104,606    |                                                          | $          | 104,622 |   | $ | 310,336 |   | $ | 310,377 |   |
| Gross profit                                           |       | $                                                              | 7,919      |                                                          | $          | 7,903 |   | $ | 24,617 |   | $ | 24,576 |   |
| Selling expenses                                       |       | $                                                              | 3,003      |                                                          | $          | 3,003 |   | $ | 8,298 |   | $ | 8,299 |   |
| General and  administrative expenses                   |       | $                                                              | 3,063      |                                                          | $          | 3,064 |   | $ | 8,642 |   | $ | 8,645 |   |
| Operating income                                       |       | $                                                              | 1,479      |                                                          | $          | 1,462 |   | $ | 7,303 |   | $ | 7,258 |   |
| Income from continuing  operations before income taxes |       | $                                                              | 1,452      |                                                          | $          | 1,435 |   | $ | 7,245 |   | $ | 7,200 |   |
| Provision for income  taxes                            |       | $                                                              | 608        |                                                          | $          | 601 |   | $ | 2,835 |   | $ | 2,818 |   |
| Income from continuing  operations                     |       | $                                                              | 844        |                                                          | $          | 834 |   | $ | 4,410 |   | $ | 4,382 |   |
| Net income                                             |       | $                                                              | 117        |                                                          | $          | 107 |   | $ | 3,273 |   | $ | 3,245 |   |

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**Statement of Cash Flows**
|                                | ** ** | **Nine Months Ended  September 30, 2004** | ** ** |
|--------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                     | ** ** | **As Reported**                                          | ** ** | **As Restated  for Correction  of Error** | ** ** |
| Net income                     |       | $                                                             | 3,273      |   | $ | 3,245 |   |
| Depreciation and  amortization |       | $                                                             | 2,881      |   | $ | 2,926 |   |
| Deferred income tax  provision |       | $                                                             | 1,897      |   | $ | 1,880 |   |

**BalanceSheets**
| ** **                                      | ** ** | **September 30, 2005** | ** ** | **December 31, 2004**                          | ** ** |
|-------------------------------------------------|------------|----------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                      | ** ** | **As Reported**             | ** ** | **As Restated  for Correction  of Error** | ** ** | **As Reported** | ** ** | **As Restated  for Correction  of Error** | ** ** |
| Deferred income taxes                           |       | $                                | 1,008      |                                                     | $          | 1,005 |   | $ | 1,294 |   | $ | 1,291 |   |
| Total current assets                            |       | $                                | 103,508    |                                                     | $          | 103,505 |   | $ | 101,495 |   | $ | 101,492 |   |
| Property, plant and  equipment, net             |       | $                                | 39,018     |                                                     | $          | 38,612 |   | $ | 37,809 |   | $ | 37,403 |   |
| Total assets                                    |       | $                                | 143,937    |                                                     | $          | 143,528 |   | $ | 140,642 |   | $ | 140,233 |   |
| Deferred income taxes  (long-term liabilities)  |       | $                                | 1,008      |                                                     | $          | 1,005 |   | $ | 1,294 |   | $ | 1,291 |   |
| Total liabilities                               |       | $                                | 76,909     |                                                     | $          | 76,906 |   | $ | 60,946 |   | $ | 60,943 |   |
| Retained earnings                               |       | $                                | 29,362     |                                                     | $          | 28,956 |   | $ | 42,170 |   | $ | 41,764 |   |
| Total stockholders’  equity                |       | $                                | 67,028     |                                                     | $          | 66,622 |   | $ | 79,696 |   | $ | 79,290 |   |
| Total liabilities and stockholders’ equity |       | $                                | 143,937    |                                                     | $          | 143,528 |   | $ | 140,642 |   | $ | 140,233 |   |

## **Critical Accounting Policies**

The preparation offinancial statements and related disclosures in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make judgments, assumptions and estimates that affect the amountsreported.  See the discussion of criticalaccounting policies in our Annual Report on Form 10-K/A for the year endedDecember 31, 2004.  For the quarterended September 30, 2005, there were no unusual uncertainties of a materialnature involved in the application of these principles nor any unusual,material variation in estimates related to these principles.

**Executive Overview**

National R.V.Holdings, Inc. (“the Company”) operates in one business segment thatdesigns, manufactures and markets motorhomes through its wholly-ownedsubsidiaries, National R.V., Inc. (NRV) and Country Coach, Inc.(CCI). The RVs are marketed primarily in the United States of America by NRV underthe Dolphin, Islander, Sea Breeze, Tradewinds and TropiCal

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brand names and byCCI under brand names including Affinity, Allure, Inspire, Intrigue, Magna andPrevost by Country Coach.

The following table sets forth for the periodsindicated the percentage of net sales represented by certain items reflected inthe Company’s Consolidated Statements of Operations:
|                                                               | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                    | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                    | ** ** | ** **                                           | ** ** | **(Restated)**                                      | ** ** | ** ** | ** ** | **(Restated)** | ** ** |
| Net sales                                                     |       | 100.0                                                | %          | 100.0                                               | %          | 100.0 | % | 100.0 | % |
| Cost of goods  sold                                           |       | 98.0                                                 |       | 93.0                                                |       | 97.2 |   | 92.7 |   |
| Gross profit                                                  |       | 2.0                                                  |       | 7.0                                                 |       | 2.8 |   | 7.3 |   |
| Selling expenses                                              |       | 4.0                                                  |       | 2.7                                                 |       | 3.2 |   | 2.4 |   |
| General and  administrative expenses                          |       | 3.1                                                  |       | 2.7                                                 |       | 2.9 |   | 2.6 |   |
| Other expense                                                 |       | 0.0                                                  |       | 0.3                                                 |       | 0.0 |   | 0.1 |   |
| Operating income (loss)                                       |       | (5.1                                                 | )          | 1.3                                                 |       | (3.3 | ) | 2.2 |   |
| Interest expense                                              |       | 0.4                                                  |       | 0.0                                                 |       | 0.3 |   | 0.0 |   |
| Other expense  (income)                                       |       | 0.0                                                  |       | 0.0                                                 |       | 0.0 |   | 0.0 |   |
| Income (loss) from continuing operations before  income taxes |       | (5.5                                                 | )          | 1.3                                                 |       | (3.6 | ) | 2.2 |   |
| Provision for  income taxes                                   |       | 0.0                                                  |       | 0.5                                                 |       | 0.0 |   | 0.9 |   |
| Income (loss) from continuing operations                      |       | (5.5                                                 | )          | 0.8                                                 |       | (3.6 | ) | 1.3 |   |
| Loss from  discontinued operations                            |       | 0.0                                                  |       | 1.4                                                 |       | 0.0 |   | 0.6 |   |
| Gain from sale  of discontinued operations                    |       | 0.0                                                  |       | (0.2                                                | )          | 0.0 |   | (0.1 | ) |
| Income taxes  related to discontinued operations              |       | 0.0                                                  |       | (0.5                                                | )          | 0.0 |   | (0.2 | ) |
| Loss from  discontinued operations, net of taxes              |       | 0.0                                                  |       | (0.7                                                | )          | 0.0 |   | (0.3 | ) |
| Net income (loss)                                             |       | (5.5                                                 | )%         | 0.1                                                 | %          | (3.6 | )% | 1.0 | % |

During the three-monthperiod ended September 30, 2005, the Company incurred a loss from continuingoperations of $5.9 million compared to income of $0.8 million from continuingoperations for the same quarter last year. The three-month period endedSeptember 30, 2005 loss per diluted share from continuing operations was $0.57compared to earnings per diluted share from continuing operations of $0.08 forthe comparable period in 2004. The loss for the nine-month period endedSeptember 30, 2005 was $12.8 million, or $1.24 per diluted share, as comparedto income of $4.4 million from continuing operations, or $0.42 per dilutedshare, for the comparable period in 2004.

**Looking Forward**

The Company is continuing to focus on aggressiveproduct development, improved productivity and cost control and increasing thequantity and quality of its dealer network. In addition, given the currentsoftness in the RV market, driven by declining consumer confidence, the Companyis extremely focused on reducing its fixed overhead costs to make money even ina potential prolonged downturn.

Improvedproductivity and cost control remain significant objectives. The Company ismaking a significant investment this year in manufacturing engineers at itsCountry Coach facilities in an effort to increase productivity. Controllingcosts also remains a high priority, specifically in the manufacturing costareas, warranty, and workers’ compensation. The Company continues to focus onimproving the quality of its motorhomes to increase consumer satisfaction anddecrease future warranty costs. Also, the Company has instituted a number ofsafety programs, which have resulted in measurably reduced workers’compensation costs. The Company expects further progress in containing itscosts as it continues to implement lean manufacturing concepts.

A continued focus on dealer acquisition and enhancedtraining programs for the Company’s workforce, service centers, dealers andconsumers are also key initiatives. The Company has undertaken efforts in theareas of safety; with new distance learning capabilities, the Company islooking forward to broadcasting its service training programs directly todealers and service providers, driving the movement for increased customersatisfaction in areas of technical maintenance. In addition,

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factory-training programsare providing the Company’s customers a basis for self-diagnostics and a betterunderstanding of the equipment they are operating.

The Recreational Vehicle Industry Association’s (RVIA)market expansion campaign, GO RVing, now in its eighth year, is fosteringgreater awareness and garnering media attention. The campaign is designed topromote the RV lifestyle. Though the RVIA expects substantial growth for theindustry in the long-term driven by favorable demographic trends, the industryis anticipating continued weakness through 2006.

**Results of Operations**

**Comparison of ContinuingOperations for the Three and Nine Months Ended September 30, 2005 to theThree and Nine Months Ended September 30, 2004:**

(Amounts in tables are inthousands, except percentages)

**Net sales**
| ** **                | ** ** | **Three Months Ended  September 30,  Percent Change** | ** ** | **Nine Months Ended  September 30,  Percent Change** | ** ** |
|---------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                | ** ** | **2005**                                                                  | ** ** | ** **                                                               | ** ** | **2004** | ** ** | **2005** | ** ** | ** ** | ** ** | **2004** | ** ** |
|                      |       |                                                                      |       |                                                                     |       |   |   |   |   |   |   |   |   |
| Net sales                 |       | $                                                                         | 108,232    |                                                                     | (3.8       | )% | $ | 112,525 |   | $ | 357,082 |   | 6.6 | % | $ | 334,953 |   |
| as a percent of net sales |       | 100.0                                                                     | %          |                                                                     |       | 100.0 | % | 100.0 | % |   |   | 100.0 | % |
|                           |            |                                                                           |            |                                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |

Net sales of $108.2million for the three-month period ended September 30, 2005 decreased $4.3million or 3.8% from the same three-month period ended September 30, 2004.A shift in mix to higher-priced diesel motorhomes was more than offset bydeclining unit shipments. Wholesale unit shipments of diesel motorhomes for thethree-month period ended September 30, 2005 were 302 units, down 4% from315 units during the same period last year. Shipments of gas motorhomes for thethree-month period ended September 30, 2005 were 303 units, down 35%compared to the 466 gas units sold during the same period last year. Thedecrease in net sales for the three-month period ended September 30, 2005 ismainly the result of declining consumer confidence resulting, in part, from thenatural disasters that occurred in the United States of America during thethird quarter combined with economic factors of higher interest rates and fuelprices which has perpetuated the industry-wide slump in demand for Class Amotorhomes.

Net sales of$357.1 million for the nine months ended September 30, 2005 increased $22.1million or 6.6% from the same period last year. Wholesale unit shipments ofdiesel motorhomes were 1,087, up 3% from 1,057 units during the same periodlast year. Wholesale unit shipments of gas motorhomes were 1,073, down 20% from1,334 units during the same period last year. The increase in net sales for thenine-month period ended September 30, 2005 is mainly attributable to the changein the sales mix to include more of the highline diesel motorhomes, which havehigher average sales prices than midline diesel units and gas powered units.

**Gross profit and gross profit margin**
| ** **          | ** ** | **Three Months Ended  September 30,  Percent Change** | ** ** | **Nine Months Ended  September 30,  Percent Change** | ** ** |
|---------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **          | ** ** | **2005**                                                                  | ** ** | ** **                                                               | ** ** | **2004** | ** ** | **2005** | ** ** | ** ** | ** ** | **2004** | ** ** |
| ** **          | ** ** | ** **                                                                | ** ** | ** **                                                               | ** ** | **(Restated)** | ** ** | ** ** | ** ** | ** ** | ** ** | **(Restated)** | ** ** |
|                |       |                                                                      |       |                                                                     |       |   |   |   |   |   |   |   |   |
| Gross profit        |       | $                                                                         | 2,165      |                                                                     | (72.6      | )% | $ | 7,903 |   | $ | 9,881 |   | (59.8 | )% | $ | 24,576 |   |
| Gross profit margin |       | 2.0                                                                       | %          | (71.4                                                                    | )%         | 7.0 | % | 2.8 | % | (61.6 | )% | 7.3 | % |
|                     |            |                                                                           |            |                                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |

The gross profit margin for the three-month periodended September 30, 2005 was 2.0% compared to 7.0% for the same period lastyear. For the nine-month period ended September 30 2005, the gross profitmargin was 2.8% compared to 7.3% for the same period last year. The primaryfactors that led to the decrease in gross margins, in order of significance,were (1) higher sales incentive costs, (2) high production inefficiencies, (3)higher warranty costs, and (4) other increases in overhead including higherspending on inventory control and product development. The high sales incentivecosts, concentrated on the Company’s lower-priced products, were driven by anoversupply of product in a weakening market. The production inefficiency costswere also concentrated primarily at the Company’s Perris, California plant andwere driven by challenges with 2006 model-year introductions, commodity flowdifficulties, and the working down of excess work-in-process inventory,combined with lower production rates leading to lower fixed-cost absorption.

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**Selling expenses**
| ** **                | ** ** | **Three Months Ended  September 30,  Percent Change** | ** ** | **Nine Months Ended  September 30,  Percent Change** | ** ** |
|---------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                | ** ** | **2005**                                                                  | ** ** | ** **                                                               | ** ** | **2004** | ** ** | **2005** | ** ** | ** ** | ** ** | **2004** | ** ** |
| ** **                | ** ** | ** **                                                                | ** ** | ** **                                                               | ** ** | **(Restated)** | ** ** | ** ** | ** ** | ** ** | ** ** | **(Restated)** | ** ** |
|                      |       |                                                                      |       |                                                                     |       |   |   |   |   |   |   |   |   |
| Selling expenses          |       | $                                                                         | 4,335      |                                                                     | 44.4       | % | $ | 3,003 |   | $ | 11,289 |   | 36.0 | % | $ | 8,299 |   |
| as a percent of net sales |       | 4.0                                                                       | %          |                                                                     |       | 2.7 | % | 3.2 | % |   |   | 2.4 | % |
|                           |            |                                                                           |            |                                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |

Selling expensesincreased $1.3 million or 44.4% for the three-month period endedSeptember 30, 2005 over the same period last year. Selling expenses forthe nine months ended September 30, 2005 increased $3.0 million or 36.0%over the same period last year. Selling expenses increased mainly due to highermedia and marketing costs to support the Company’s dealer expansion and otherinitiatives, higher dealer convention expenses, and higher sales commissionsresulting from higher sales.

**General and administrative expenses**
| ** **                          | ** ** | **Three Months Ended  September 30,  Percent Change** | ** ** | **Nine Months Ended  September 30,  Percent Change** | ** ** |
|-------------------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                          | ** ** | **2005**                                                                  | ** ** | ** **                                                               | ** ** | **2004** | ** ** | **2005** | ** ** | ** ** | ** ** | **2004** | ** ** |
| ** **                          | ** ** | ** **                                                                | ** ** | ** **                                                               | ** ** | **(Restated)** | ** ** | ** ** | ** ** | ** ** | ** ** | **(Restated)** | ** ** |
|                                |       |                                                                      |       |                                                                     |       |   |   |   |   |   |   |   |   |
| General and administrative expenses |       | $                                                                         | 3,346      |                                                                     | 9.2        | % | $ | 3,064 |   | $ | 10,489 |   | 21.3 | % | $ | 8,645 |   |
| as a percent of net sales           |       | 3.1                                                                       | %          |                                                                     |       | 2.7 | % | 2.9 | % |   |   | 2.6 | % |
|                                     |            |                                                                           |            |                                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |

General andadministrative expenses totaling $3.3 million for the three-month period endedSeptember 30, 2005 were up $0.3 million, or 9.2%, compared to the same periodlast year. For the nine-month period ended September 30, 2005, general andadministrative expenses were $10.5 million, representing an increase of $1.8million, or 21.3%, compared to the same period last year. The increase ingeneral and administrative expenses is due to higher audit and professionalfees, as well as higher staffing levels to support increased sales andproduction and increased staffing to support ongoing Sarbanes-Oxley compliance.

**Interest expense**
| ** **                | ** ** | **Three Months Ended  September 30,  Percent Change** | ** ** | **Nine Months Ended  September 30,  Percent Change** | ** ** |
|---------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                | ** ** | **2005**                                                                  | ** ** | ** **                                                               | ** ** | **2004** | ** ** | **2005** | ** ** | ** ** | ** ** | **2004** | ** ** |
|                      |       |                                                                      |       |                                                                     |       |   |   |   |   |   |   |   |   |
| Interest expense          |       | $                                                                         | 395        |                                                                     | 659.6      | % | $ | 52 |   | $ | 983 |   | 656.2 | % | $ | 130 |   |
| as a percent of net sales |       | 0.4                                                                       | %          |                                                                     |       | 0.0 | % | 0.3 | % |   |   | 0.0 | % |
|                           |            |                                                                           |            |                                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |

Interest expense for thethree-month periods ended September 30, 2005 and 2004 was $0.4 million and $0.1million, respectively. For the nine-month periods ended September 20, 2005 and2004, interest expense was $1.0 million compared to $0.1 million for the sameperiod last year. The change in interest expense is primarily attributable toincreased borrowings on the line of credit.

**Other expense (income)**
| ** **                | ** ** | **Three Months Ended  September 30,  Percent Change** | ** ** | **Nine Months Ended  September 30,  Percent Change** | ** ** |
|---------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                | ** ** | **2005**                                                                  | ** ** | ** **                                                               | ** ** | **2004** | ** ** | **2005** | ** ** | ** ** | ** ** | **2004** | ** ** |
|                      |       |                                                                      |       |                                                                     |       |   |   |   |   |   |   |   |   |
| Other expense (income)    |       | $                                                                         | 19         |                                                                     | 176.0      | % | $ | (25 | ) | $ | (72 | ) | 0.0 | % | $ | (72 | ) |
| as a percent of net sales |       | 0.0                                                                       | %          |                                                                     |       | 0.0 | % | 0.0 | % |   |   | 0.0 | % |
|                           |            |                                                                           |            |                                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

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Other expense (income)for the three-month periods ended September 30, 2005 and 2004 wasimmaterial. Other income for the nine-month periods ended September 30,2005 was mainly interest and fees related to the note receivable. Other incomefor the nine-month period ended September 30, 2004 was mainly the gain onthe sale of real property in Florida. As a percentage of net sales, the amountis immaterial.

**Provision for income taxes**
| ** **                  | ** ** | **Three Months Ended  September 30,  Percent Change** | ** ** | **Nine Months Ended  September 30,  Percent Change** | ** ** |
|-----------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                  | ** ** | **2005**                                                                  | ** ** | ** **                                                               | ** ** | **2004** | ** ** | **2005** | ** ** | ** ** | ** ** | **2004** | ** ** |
| ** **                  | ** ** | ** **                                                                | ** ** | ** **                                                               | ** ** | **(Restated)** | ** ** | ** ** | ** ** | ** ** | ** ** | **(Restated)** | ** ** |
|                        |       |                                                                      |       |                                                                     |       |   |   |   |   |   |   |   |   |
| Provision for income  taxes |       | $                                                                         | —     |                                                                     | (100.0     | )% | $ | 601 |   | $ | — |   | (100.0 | )% | $ | 2,818 |   |
| as a percent of net sales   |       | 0.0                                                                       | %          |                                                                     |       | 0.5 | % | 0.0 | % |   |   | 0.9 | % |
|                             |            |                                                                           |            |                                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |

As discussed in Note 8 tothe consolidated financial statements included in this Form 10-Q/A, recentcumulative losses, the downturn in current market conditions and its impact onnear-term earnings led the Company to conclude that it was more likely than notthat its net deferred tax asset will not be realized. As a result, the Companycontinues to record a full valuation allowance against its net deferred taxassets resulting in a zero effective tax rate for 2005. The effective tax ratefor the three and nine-month periods ended September 30, 2004 was 41.9% and39.1%, respectively. The Company expects to record a full valuation allowanceon future tax benefits until it can sustain an appropriate level ofprofitability.

**Loss from discontinued operations, net of taxes**
| ** **                                      | ** ** | **Three Months Ended  September 30,  Percent Change** | ** ** | **Nine Months Ended  September 30,  Percent Change** | ** ** |
|-------------------------------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **2005**                                                                  | ** ** | ** **                                                               | ** ** | **2004** | ** ** | **2005** | ** ** | ** ** | ** ** | **2004** | ** ** |
|                                            |       |                                                                      |       |                                                                     |       |   |   |   |   |   |   |   |   |
| Loss from discontinued operations, net of taxes |       | $                                                                         | —     |                                                                     | (100.0     | )% | $ | (727 | ) | $ | — |   | (100.0 | )% | $ | (1,137 | ) |
| as a percent of net sales                       |       | 0.0                                                                       | %          |                                                                     |       | (0.7 | )% | 0.0 | % |   |   | (0.3 | )% |
|                                                 |            |                                                                           |            |                                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |

On September 24,2004, the Company sold its Travel Trailer business assets to Weekend Warrior, aprivately owned, California-based ramp-trailer manufacturer. The loss fromdiscontinued operations (including a $0.3 million gain on the sale) for thethree-month and nine-month periods ended September 30, 2004 was $0.7million and $1.1 million, respectively.

**Liquidity and Capital Resources**

At September 30, 2005 and December 31, 2004,the Company had cash and cash equivalents of $0.01 million (excludingrestricted cash totaling $0.03 million and $0.25 million, respectively,required to secure a letter of credit in connection with one of the Company’sinsurance policies). During the nine-month period ended September 30, 2005, theCompany financed its operations primarily through its existing working capitaland its line of credit with UPS Capital Corporation (“UPSC”).

During the nine-month period ended September 30,2005 the Company used $12.0 million of cash in its operations, with the largestcontributing factors being a $12.8 million net loss, a $3.1 million increase inreceivables and a $5.2 million increase in inventories, being partially offsetby a $1.8 million increase in accrued expenses. During the nine-month periodended September 30, 2004 the Company used $11.0 million of cash in itsoperations, with the two largest contributing factors being a $25.8 millionincrease in inventories and a $2.5 million increase in receivables, and thelargest offsetting factor being an $8.2 million increase in accounts payable.

On September 30, 2005, the Company had workingcapital of $33.8 million compared to $49.1 million at December 31, 2004. Thisdecrease of $15.3 million was primarily due to a $9.4 million increase inborrowings on the line of credit and a $4.2 million increase in the bookoverdraft, partially offset by a $2.9 million increase in receivables and a$2.1 million increase in inventories.

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For the nine-month period ended September 30,2005, net cash used in investing activities was $1.5 million, consistingprimarily of $3.6 million in capital expenditures, partially offset byrepayments on note receivable of $2.0 million. Net cash provided by financingactivities was $13.5 million, primarily due to net advances on the line ofcredit of $9.4 million and a $4.2 million increase in book overdraft.

On August 12, 2005,the Company entered into a new three-year asset-based revolving credit facilitywith UPSC and Wells Fargo Bank for $25 million, with the Company having theoption, subject to certain conditions, of increasing the revolver in $5 millionincrements up to a total credit facility of $40 million. On September 29,2005, the Company affected such an increase in the amount of the creditfacility from $25 million to $30 million. The credit facility is collateralizedby all of the Company’s assets other than real estate. Borrowing availabilityis based on eligible accounts receivable and inventory. The facility alsoincludes a requirement to maintain a blocked account arrangement, wherebyremittances from the Company’s customers reduce the debt outstanding. Thecredit facility contains, among other provisions, certain financial covenants,including funded debt to EBITDA, and a fixed charge coverage ratio. If thesefinancial covenants are not met, the Company’s availability under the creditfacility will be reduced. The Company didnot meet these financial covenants as of September 30, 2005, and currently doesnot expect to until September 30, 2006. Until these covenants are met, the Company’s borrowing availabilityunder its $40 million facility is limited to an amount between $27 million to$32 million, depending on eligible inventory and accounts receivable. Initialamounts borrowed under the revolving credit facility bear interest at the primerate listed in the Wall Street Journal plus 0.50 percentage points and may besubsequently adjusted down based on a trailing twelve month funded debt toEBITDA calculation.

At September 30, 2005 andDecember 31, 2004, the Company had outstanding loans under its line ofcredit then in effect totaling $22.1 million and $12.7 million, respectively.At September 30, 2005, the interest rate on the outstanding borrowings underthe line of credit was 7.25%. The weighted average interest rate for theborrowings under the line of credit during the nine-month period endedSeptember 30, 2005 and 2004 was 6.56% and 5.01%, respectively.

Management’s plan to achieve operational profitabilityincludes continuing or starting a variety of initiatives to improve itsearnings and working capital position, including: i) new product introductionsin the fourth quarter of 2005 with additional new product and floor planintroductions in the first half of 2006, ii) new dealer additions to fill openmarket areas or replace under-performing dealers, iii) reductions in allcategories of inventory, iv) head count re-balancings to current retailsales-supported production levels, v) engineering reviews of materialcomponents for the removal of non-value added items to reduce both material andassembly costs, vi) continued thorough motorhome inspections to improve qualityand to more timely report failures and vii) manufacturing cost reductionsresulting from the continued implementation of lean manufacturing concepts.

In order to fund on-going operations in theshort-term, the Company remains dependent upon its ability to utilize outsidefinancing through borrowings on its line of credit until it achieves sustainedoperational profitability through a combination of increased sales, costreductions and improved product margins. After consideration of therestrictions of the borrowing capacity noted in Note 5, the Company believes ithas sufficient financial resources to fund its operations in the short-term.However, the Company’s ability to meet its obligations in the long-term isdependent on its ability to generate positive cash flows from operations and isdependent on continued borrowings under its line of credit. If management isunable to achieve its operational profitability plan or unforeseen events occurand the Company’s existing line of credit is insufficient to allow the Companyto meet its obligations, the Company may need to implement alternative plansthat could include long-term financing collateralized by real estate (which ispresently unencumbered) or obtaining additional debt financing, additionalreductions in operating costs, deferral of capital expenditures, and furtherreductions in working capital.  While theCompany believes that it could successfully complete the alternative plans, ifnecessary, there can be no assurance that such alternatives would be availableon acceptable terms and conditions or that the Company would be successful inits implementation of such plans.

As further discussed inNote 6 to the consolidated financial statements included in thisForm 10-Q/A, the Company generally agrees with its dealers’ lenders torepurchase any unsold RVs in the event of various circumstances. The Company’smaximum potential exposure under these agreements approximated $169 million atSeptember 30, 2005. As with receivables, the risk of loss under the repurchaseagreements was spread over a number of dealers and lenders and was reduced bythe resale value of the RVs, which the Company would be required to repurchase.Losses under these agreements have not been material in the past and managementdoes not believe that any future losses under such agreements will have amaterial adverse effect on the Company’s consolidated financial position,results of operations or cash flows.

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In August 2004, the Company entered into an agreement to acquire,for $3 million, approximately 73 acres of land adjacent to its CountryCoach, Inc. facility in Junction City, Oregon. The Company paid a depositof $0.1 million. The closing of the purchase is subject to customary closingconditions and is expected to occur in 2006. The Company believes thecombination of internally generated funds and unused borrowing availabilitywill be sufficient to meet this obligation.

**Recently Issued Accounting Pronouncements**

In November 2004, the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standards (SFAS) No. 151, “InventoryCosts-an Amendment of ARB No. 43, Chapter 4.” SFAS No. 151 requiresthat accounting for items such as idle facility expense, freight, handlingcosts, and wasted materials (spoilage) be recognized as current period chargesregardless of whether they meet the criterion of “so abnormal.” In addition,this statement requires that allocation of fixed production overheads to thecosts of conversion be based on the normal capacity of the productionfacilities. This statement is effective for inventory costs incurred duringfiscal years beginning after June 15, 2005. The provision of thisstatement shall be applied prospectively. The Company has not determined theimpact that adoption of this standard will have on its consolidated financialstatements.

In December 2004,the FASB issued FASB Staff Position (FSP) 109-1, “Application of FASB StatementNo. 109, Accounting for Income Taxes, to the Tax Deduction on QualifiedProduction Activities Provided by the American Jobs Creation Act of 2004.” TheAmerican Jobs Creation Act, or AJCA, introduces a special 9% tax deduction onqualified production activities. FSP 109-1 clarifies that this tax deductionshould be accounted for as a special tax deduction in accordance with SFAS No.109, “Accounting for Income Taxes.” FSP 109-1 is effective upon its issuance.The adoption of FSP 109-1 did not have a material impact on the Company’sconsolidated financial statements.

In December 2004,the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFASNo. 123R), which replaces SFAS No. 123, “Accounting for Stock-BasedCompensation,” (SFAS No. 123) and supercedes APB Opinion No. 25, “Accountingfor Stock Issued to Employees.” SFAS No. 123R requires all share-basedpayments to employees, including grants of employee stock options, to berecognized in the financial statements based on their fair values beginningwith the first annual period after June 15, 2005, with early adoptionencouraged. The pro forma disclosures previously permitted under SFAS No.123 no longer will be an alternative to financial statement recognition. TheCompany is required to adopt SFAS No. 123R in the first calendar quarterof 2006, beginning January 1, 2006. Under SFAS No. 123R, the Companymust determine the appropriate fair value model to be used for valuingshare-based payments, the amortization method for compensation cost and thetransition method to be used at date of adoption. The transition methodsinclude modified prospective and modified retrospective adoption options. Underthe modified retrospective option, prior periods may be restated either as ofthe beginning of the year of adoption or for all periods presented. Themodified prospective method requires that compensation expense be recorded forall unvested stock options and restricted stock at the beginning of the firstquarter of adoption of SFAS No. 123R, while the modified retrospectivemethod would record compensation expense for all unvested stock options andrestricted stock beginning with the first period restated. The Company isevaluating the requirements of SFAS No. 123R. The Company has not yetdetermined the method of adoption or the affect of adopting SFAS No. 123R,and the Company has not determined whether the adoption will result in amountsthat are similar to the current pro forma disclosures under SFAS No. 123and SFAS No. 148, “Accounting for Stock-Based Compensation - Transition andDisclosure” (SFAS No. 148).

In June 2005, theFASB issued SFAS No. 154, “Accounting Changes and Error Corrections—areplacement of APB No. 20 and FAS No. 3” (“SFAS No. 154”). SFAS No.154 provides guidance on the accounting for, and reporting of, accountingchanges and error corrections. It establishes, unless impracticable,retrospective application as the required method for reporting a change inaccounting principle in the absence of explicit transition requirementsspecific to the newly adopted accounting principle. SFAS No. 154 also providesguidance for determining whether retrospective application of a change inaccounting principle is impracticable and for reporting a change whenretrospective application is impracticable. The correction of an error inpreviously issued financial statements is not an accounting change. However,the reporting of an error correction involves adjustments to previously issuedfinancial statements similar to those generally applicable to reporting anaccounting change retrospectively. Therefore, the reporting of a correction ofan error by restating previously issued financial statements is also addressedby SFAS No. 154. SFAS No. 154 is required to be adopted in fiscal yearsbeginning after December 15, 2005. The Company does not believe thatadoption of this standard will have an impact on its consolidated financialstatements.

InAugust 2005, the FASB issued FSP 123-1, “Classification and Measurement ofFreestanding Financial Instruments Originally Issued in Exchange for EmployeeServices under SFAS No. 123R.” In this FSP, the FASB decided to defer therequirements in SFAS No. 123R that make a freestanding financial instrumentsubject to the recognition and measurement requirements of other generallyaccepted accounting principles (“GAAP”) when the rights conveyed by theinstrument are no longer dependent on the holder being an employee. Theguidance in this FSP should be applied upon initial adoption of SFAS No. 123R.The Company is evaluating the requirements of SFAS No. 123R. The Company hasnot yet determined the method of adoption or the affect of adopting SFAS No.123R, and the Company has not determined whether the adoption will result inamounts that are similar to the current pro forma disclosures under SFAS Nos.123 and 148.

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

**PART I,ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk**

The Company has no significant financial instruments.The Company does not have any significant foreign currency exposure because itdoes not transact business in foreign currencies. However, the Company isexposed to interest rate changes related primarily to cash borrowings on theCompany’s credit facility. The weighted average interest rate for theborrowings on the credit facility during the nine-month period ended September30, 2005 was 6.56%. For every 0.25% increase in interest rates, the Companywould expect a quarterly increase in interest expense of approximately $0.6thousand for each $1.0 million borrowed.

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

**PART I, ITEM 4 – CONTROLS AND PROCEDURES**

**DisclosureControls 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, asamended (the “Exchange Act”), is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms, and thatsuch information is accumulated and communicated to management, including theCompany’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 the Company’s are designed to do, and managementnecessarily was required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

In connection with the preparation of its QuarterlyReport on Form 10-Q, as of September 30, 2005, an evaluation was performedunder the supervision and with the participation of the Company’s management,including the CEO and CFO, of the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures (as defined inRule 13a-15(e) under the Exchange Act). In light of the materialweaknesses referenced below which the Company first identified in connectionwith the assessment required by Section 404 of the Sarbanes-Oxley Act of2002 and disclosed in its Form 10-K/A for the year ended December 31,2004 and which continued to exist as of the end of the period covered by thisreport, the Company’s CEO and CFO concluded that, as of the end of the periodcovered by this report, the disclosure controls and procedures were noteffective at a reasonable assurance level as of September 30, 2005.

**Internal Control over FinancialReporting**

A material weakness is a control deficiency, or acombination of control deficiencies, that results in more than a remotelikelihood that a material misstatement of the annual or interim financialstatements will not be prevented or detected. As of December 31, 2004, weidentified the following material weaknesses in the Company’s internal controlover financial reporting, which continued to exist as of September 30, 2005:

*1.Insufficient personnel resources and technical expertise within its accountingfunction.* The Company did not maintain effective controlsover the financial reporting process because of insufficient personnelresources and technical expertise within the accounting function. This materialweakness contributed to the following individual material weaknesses:  (a) errors in the preparation and reviewof schedules and reconciliations supporting certain general ledger accountbalances. As a result, errors were not detected in the amortization ofleasehold improvements and certain accrued liability accounts, including salesand marketing, warranty, legal and workers’ compensation, and the relatedincome statement accounts, including cost of goods sold, selling and generaland administrative expenses; (b) inadequate financial statementdisclosures, primarily related to the presentation of certain balances withinthe restatement footnote, sale of a division and capital leases were notidentified by the corporate accounting staff; and (c) accounting cutofferrors primarily related to accrued marketing expenses and an inability toproperly and timely account for capital leases entered into during the yearwere not identified at the NRV division. This control deficiency resulted inaudit adjustments to the 2004 annual consolidated financial statements affectingaccrued liabilities, property, plant and equipment, and the related incomestatement accounts, primarily cost of goods sold, selling, general andadministrative, amortization and interest, and restatement of disclosures inthe 2004 annual consolidated financial statements. Insufficient personnelresources and technical expertise also contributed to the material weaknessesdiscussed in 2, 3, 4 and 5 below. Additionally, these control deficienciescould result in misstatements in the aforementioned accounts that would resultin a material misstatement to the annual or interim consolidated financialstatements that would not be prevented or detected.

*2.Revenue Recognition*— The Company did not maintain effectivecontrols over the timing of the revenue recognition related to the sale ofcertain motorhomes at its NRV division. Specifically, under a deferred paymentarrangement the Company held the manufacturer’s certificate of origin assecurity for payment. This control deficiency resulted in the restatement ofthe Company’s third quarter 2004 consolidated financial statements to correctthe timing of revenue recognition. This control deficiency also resulted inaudit adjustments to the 2004 annual consolidated financial statements.Additionally, this control deficiency could result in a misstatement of revenueand deferred revenue that would result in a material misstatement to the annualor interim consolidated financial statements that would not be prevented ordetected.

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*3.**Accountingfor Sales Incentives –* The Company did not maintain effectivecontrols over the accounting for sales incentives. Specifically, certain salesincentive programs which are paid directly to dealers or dealers’ salesrepresentatives were improperly classified as selling expenses and should havebeen classified as a reduction of revenue. This control deficiency resulted inthe restatement of the Company’s 2003 and 2002 consolidated financial statements.This control deficiency also resulted in audit adjustments to the 2004 annualconsolidated financial statements. Additionally, this control deficiency couldresult in a misstatement of revenue and selling expenses that would result in amaterial misstatement to the annual or interim consolidated financialstatements that would not be prevented or detected.

*4. Accounting for Income Taxes –*TheCompany did not maintain effective controls over the determination andreporting of the provision for income taxes and related deferred income taxbalances. Specifically, the Company did not maintain effective controls toreview and monitor the accuracy of the valuation allowance as well as othercomponents of the income tax provision calculations and related deferred incometaxes. This control deficiency resulted in an audit adjustment to the fourthquarter 2004 annual consolidated financial statements. Additionally, thiscontrol deficiency could result in a misstatement of the income tax provisionor related deferred income tax balances that would result in a materialmisstatement to the annual or interim consolidated financial statements thatwould not be prevented or detected.

*5. Physical inventory process*– The Company did not maintain effective controls over the accuracy of thephysical inventory process at its NRV division. Specifically, the NRV divisiondid not have controls to ensure all of the individuals involved in the physicalinventory count were properly trained and supervised and that discrepancies betweenquantities counted and the accounting records were properly investigated.Further, the NRV division did not have controls to ensure the accountingrecords were adjusted to reflect the actual quantities counted during thephysical inventory process. This control deficiency resulted in an auditadjustment to the fourth quarter 2004 annual consolidated financial statements.Additionally, this control deficiency could result in a misstatement ofinventory and cost of goods sold that would result in a material misstatementto the annual or interim consolidated financial statements that would not beprevented of detected.

*6. Unrestricted access toprograms and data* – The Company did not maintain effectivecontrols over access to certain financial application programs and data at itsNRV division. Specifically, there were instances in which informationtechnology personnel and users with accounting and reporting responsibilitieshad access to financial accounting application programs and data that was incompatiblewith their functional business requirements. Further, the activities of theseindividuals were not subject to independent monitoring. These controldeficiencies applied to certain systems and processes including the financialstatement preparation, human resources, payroll, purchasing, receiving andrevenue and billing. These control deficiencies did not result in an adjustmentto the 2004 interim or annual consolidated financial statements. However, thesecontrol deficiencies could result in a misstatement to financial statementaccounts that would result in a material misstatement to the annual or interimconsolidated financial statements that would not be prevented or detected.

**Remediation of Material Weaknesses**

As of the filing date ofthis Form 10-Q/A, the Company had not fully remediated one of the materialweaknesses in the Company’s internal control over financial reportingidentified as of December 31, 2004, which continued to exist as ofSeptember 30, 2005. We have taken the following actions to address the materialweaknesses described above:

**1.*Insufficientpersonnel resources and technical expertise within its accounting function*

Management has assessedthe organization of its accounting personnel and the technical expertise withinthe accounting function. As a result, the Company has established an accountingfunction at the parent company level. The NRV divisional controller waspromoted to Corporate Controller and will be responsible for setting andestablishing accounting policies for the Company and its two divisions inaccordance with generally accepted accounting principles (“GAAP”) andguidelines required by the Securities and Exchange Commission (“SEC”). Toassist the Corporate Controller, the Company has also  created the position of Manager of FinancialReporting. In addition, the Company has subscribed to an on-line research toolto assist this group in staying abreast of new accounting pronouncements,proper accounting disclosure and also research technical accounting issues relatingto the Company’s ongoing business transactions. At the NRV division, theCompany has hired a new Controller and Accounting Manager. As a result of there-organization of its accounting personnel and increased technical expertisewithin the accounting function, management believes that these actions willremediate the material weaknesses described in items (a), (b) and(c) above. As of the date of the filing of the 2005 Form 10-K, theCompany has not fully remediated the material weakness in the Company’sinternal control over financial reporting. However, during fiscal year 2006,management has taken a number of steps that it believes will impact theeffectiveness of our internal control over financial reporting. Management hasnot completed its 2006 assessment of internal control over financial reporting.Upon completion of the 2006 assessment, management will report on internalcontrol over financial reporting and the status of remediation.

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2. *RevenueRecognition*

Effective April 1, 2005, the NRV divisiondiscontinued the deferred payment arrangement under which it held themanufacturer’s certificate of origin as security for payment. During the secondquarter of 2005, the NRV division revised its quarterly closing procedures tostrengthen its review of any new agreements or other terms to determine whetherthe related transactions are accounted for in the proper period. As a result ofthe discontinued deferred payments arrangements and additional controlprocedures implemented, management believes that these actions will remediatethis material weakness. This material weakness was remediated as ofDecember 31, 2005.

3. *Accounting for Sales Incentives*

Effective May 31,2005, the Company changed its method of accounting for sales incentive programsthat are paid directly to the dealers’ sales representatives. These salesincentives are now classified as a reduction of revenue rather than as aselling expense. These sales incentives were restated for all years presentedin the fiscal year 2004 Form 10-K and have been properly classified in thefirst, second and third quarters of fiscal year 2005. As more fully discussedin 1 above, the Company has increased its personnel and expertise within theaccounting function. In addition, the Company has revised its quarterly closingprocedures to strengthen its review of all existing sales incentive programs toensure they are accounted for properly. As a result of the re-organization ofits accounting personnel and increased technical expertise within theaccounting function and additional control procedures implemented, managementbelieves that these actions will remediate this material weakness. Thismaterial weakness was remediated as of December 31, 2005.

4. *Accountingfor Income Taxes*

As more fully discussed in 1 above, the Company has recently increasedits personnel and technical expertise within the accounting function. Inaddition, the Company revised its quarterly closing procedures to strengthenits review of the income tax provision to ensure the accuracy of the componentsof the income tax provision and related deferred income taxes. As a result ofthe reorganization of its accounting personnel and technical expertise withinthe accounting function and additional control procedures implemented,management believes that these actions will remediate this material weakness.This material weakness was remediated as of December 31, 2005.

5. *Physical inventory process*

Beginning with the first quarter of 2005, managementincreased its training of all personnel involved in the physical inventoryprocess at the NRV division, particularly those individuals performing the dataentry function. Additionally, the physical inventory report was revised suchthat any inventory item, which does not include a corresponding item number,will result in an exception requiring follow-up by management. In addition, theNRV division has implemented enhanced review procedures by senior management ofthe reconciliation process between the quantities obtained from the physicalinventory tags and the quantities obtained from the updated perpetual inventoryreport. As a result of the increased training of all personnel involved in thephysical inventory process, the revision of certain physical inventory reportsand additional control procedures implemented, management believes that theseactions will remediate this material weakness. This material weakness wasremediated as of December 31, 2005.

6. *Unrestricted access to programs and data*

The NRV division hascorrected access rights for known instances in which information technologypersonnel and users with accounting and reporting responsibilities had accessto financial accounting applications programs and data that was incompatiblewith their functional business requirements. The NRV division is also in theprocess of refining and developing ongoing processes to ensure that properaccess rights are granted, reviewed and maintained in a timely manner. As aresult of the correction of access rights of information technology personneland users with accounting and reporting responsibilities and additional controlprocedures implemented, management believes that these actions will remediatethis material weakness. This material weakness was remediated as ofDecember 31, 2005.

The Company believes that it has improved itsdisclosure controls and procedures and will be able to remedy the remainingmaterial weakness identified as part of its assessment process at December 31,2004 and 2005. Notwithstanding the Company’s remediation efforts, because ofthe inherent limitations in a cost-effective control system, misstatements dueto error or fraud may occur and not be detected.

**Changes in Internal Control overFinancial Reporting**

Except as disclosed above, there have been no changesin the Company’s internal control over financial reporting during the mostrecently completed fiscal quarter that has materially affected, or isreasonably likely to materially affect, the Company’s internal control overfinancial reporting.

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

**PART II- OTHER INFORMATION**

**ITEM 6.****EXHIBITS**

A. Exhibits

| 10.1   | Credit Agreement, dated as of August 12, 2005  between the Company, NRV, CCI and UPS Capital Corporation and Wells Fargo  Bank, as lenders. (1)          |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                     |
| 10.2   | Loan Modification Agreement, dated as October 4,  2005, between the Company, NRV, CCI and UPS Capital Corporation and Wells  Fargo Bank, as lenders. (1) |
|   |                                                                                                                                                     |
| 31.1   | Certification of Chief Executive Officer pursuant to  Rule 13a-14(a)/15d-14(a) of the Exchange Act.                                            |
|   |                                                                                                                                                     |
| 31.2   | Certification of Chief Financial Officer pursuant to  Rule 13a-14(a)/15d-14(a) of the Exchange Act.                                            |
|   |                                                                                                                                                     |
| 32.1   | Certification pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                      |

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(1) Previously filed withthe Quarterly Report on Form 10-Q for the quarter ended September 30, 2005filed with the Securities and Exchange Commission on November 8, 2005.

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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: September  15, 2006 | By                               | /s/ Thomas J. Martini |   |
|                      |                             |                       |   |
|                      | Thomas J. Martini                |                       |   |
|                      | Chief Financial Officer          |                       |   |
|                      | (Principal Accounting and        |                       |   |
|                      | Financial  Officer)              |                       |   |
|                           |                                  |                            |  |  |  |

 

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