10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006.

OR

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

For the transition period from _____ to _____.

Commission file number 1-7160

COACHMEN INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Indiana	35-1101097
(State of incorporation or organization)	(IRS Employer Identification No.)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o    No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Number of shares of Common Stock, without par value, outstanding as of the close of business on April 30, 2006:  15,627,365

FORM 10-Q
INDEX
Part I. Financial Information	Page
Financial Statements:
Consolidated Balance Sheets at March 31, 2006 and December 31, 2005	3
Consolidated Statements of Operations for the three months ended March 31, 2006 and 2005	4
Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2005	5
Notes to Consolidated Financial Statements	6-15
Management’s Discussion and Analysis of Financial Condition and Results of Operations	16-21
Quantitative and Qualitative Disclosures About Market Risk	22
Controls and Procedures	22
Part II. Other Information
Item 1. Legal Proceedings	23
Item 6. Exhibits	23
Signatures	24
Index to Exhibits	25

Coachmen Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands)

		March 31,			December 31,
Assets		2006			2005
CURRENT ASSETS
Cash and cash equivalents	$	8,906		$	2,780
Trade receivables, less allowance for doubtful receivables 2006 - $1,283 and 2005 - $1,240		39,669			47,174
Other receivables		2,695			1,969
Refundable income taxes		9,750			10,284
Inventories		114,980			121,304
Prepaid expenses and other		3,281			3,992
Deferred income taxes		11,133			11,421
Total current assets		190,414			198,924
Property, plant and equipment, net		60,840			67,581
Notes receivable		7,219			2,493
Goodwill		16,865			17,383
Cash value of life insurance, net of loans		30,798			28,880
Deferred income taxes		2,913			4,279
Assets held for sale		2,666			291
Other		2,762			2,985
TOTAL ASSETS	$	314,477		$	322,816
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Short-term borrowings	$	-		$	12,276
Accounts payable, trade		41,106			31,658
Accrued income taxes		801			533
Accrued expenses and other liabilities		47,644			54,856
Floorplan notes payable		5,068			4,361
Current maturities of long-term debt		1,818			2,223
Total current liabilities		96,437			105,907
Long-term debt		11,561			12,913
Postretirement deferred compensation benefits		10,488			10,182
Other		-			11
Total liabilities		118,486			129,013
COMMITMENTS AND CONTINGENCIES(see Note 10)
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized 60,000 shares; issued 2006 - 21,140 shares and 2005 - 21,134 shares		92,224			92,164
Additional paid-in capital		7,247			6,465
Unearned compensation		-			(142	)
Accumulated other comprehensive income (loss)		12			(6	)
Retained earnings		156,219			154,246
Treasury shares, at cost, 2006 - 5,512 shares and 2005 - 5,375 shares		(59,711	)		(58,924	)
Total shareholders' equity		195,991			193,803
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	314,477		$	322,816

See Notes to Consolidated Financial Statements.

- 3 -

Coachmen Industries, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited) 

	Three Months Ended March 31,
	2006			2005
Net sales	$	162,554		$	192,249
Cost of sales		147,912			173,464
Gross profit		14,642			18,785
Operating expenses:
Delivery		8,229			8,121
Selling		5,180			7,294
General and administrative		2,850			4,782
Gain on sale of assets, net		(2,677	)		(3	)
		13,582			20,194
Operating income (loss)		1,060			(1,409	)
Nonoperating (income) expense:
Interest expense		968			893
Investment income		(362	)		(817	)
Other (income) expense, net		(164	)		(68	)
		442			8
Income (loss) from continuing operations before income taxes		618			(1,417	)
Income taxes (credit)		214			(464	)
Net income (loss) from continuing operations		404			(953	)
Discontinued operations
Loss from operations of discontinued entities (net of tax credits of $(175) and $(301), respectively)		(329	)		(433	)
Gain on sale of assets of discontinued entities (net of taxes of $1,510 in 2006)		2,835			-
Income (loss) from discontinued operations		2,506			(433	)
Net income (loss)	$	2,910		$	(1,386	)
Earnings (loss) per share - Basic
Continuing operations	$	.03		$	(.06	)
Discontinued operations		.16			(.03	)
Net earnings (loss) per share		.19			(.09	)
Earnings (loss) per share - Diluted
Continuing operations		.03			(.06	)
Discontinued operations		.16			(.03	)
Net earnings (loss) per share		.19			(.09	)
Number of common shares used in the computation of earnings (loss) per share:
Basic		15,593			15,526
Diluted		15,650			15,526
Cash dividends declared per common share	$	.06		$	.06

See Notes to Consolidated Financial Statements.

- 4 -

Coachmen Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	2,910		$	(1,386	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		1,669			2,232
Provision for doubtful receivables, net of recoveries		148			274
Net realized and unrealized (gains)/losses on marketable securities and derivatives		18			(285	)
(Gain) loss on sale of properties and other assets, net		(7,022	)		(4	)
Increase in cash surrender value of life insurance policies		(584	)		(425	)
Deferred income tax provision (benefit)		1,654			(45	)
Other		407			(590	)
Changes in certain assets and liabilities, net of effects of acquisitions and dispositions:
Trade receivables		1,880			(4,833	)
Inventories		(5,842	)		(9,888	)
Prepaid expenses and other		94			772
Accounts payable, trade		10,958			16,434
Income taxes - accrued and refundable		802			(3,360	)
Accrued expenses and other liabilities		(1,727	)		5,688
Net cash provided by operating activities		5,365			4,584
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of marketable securities		-			1,399
Proceeds from sale of properties and other assets		17,870			8
Investments in marketable securities		(1,334	)		(1,457	)
Purchases of property and equipment		(1,785	)		(2,028	)
Other		188			(270	)
Net cash provided by (used in) investing activities		14,939			(2,348	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings		7,070			232
Payments of short-term borrowings		(18,639	)		(10,206	)
Proceeds from long-term debt		255			-
Payments of long-term debt		(2,012	)		(274	)
Issuance of common shares under stock incentive plans		85			91
Cash dividends paid		(937	)		(943	)
Other		-			35
Net cash used in financing activities		(14,178	)		(11,065	)
Increase (decrease) in cash and cash equivalents		6,126			(8,829	)
CASH AND CASH EQUIVALENTS
Beginning of period		2,780			14,992
End of period	$	8,906		$	6,163
Supplemental disclosures of cash flow information:
Operating cash received during the quarter related to insurance settlement	$	2,875		$	2,213

See Notes to Consolidated Financial Statements.

- 5 -

Coachmen Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1.    BASIS OF PRESENTATION.

The condensed consolidated financial statements have been prepared by Coachmen Industries, Inc. (“the Company”), without audit, in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. Management believes the disclosures made in this document are adequate so as not to make the information presented misleading.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements, taken as a whole, contain all adjustments which are of a normal recurring nature necessary to present fairly the financial position of the Company as of March 31, 2006, and the results of its operations and cash flows for the interim periods presented. Operating results for the three-month period ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2005.

Reclassifications - Certain reclassifications have been made in the fiscal 2005 consolidated financial statements and related footnotes to conform to the presentation used in 2006.

2.    SEGMENT INFORMATION.

The Company has determined that its reportable segments are those that are based on the Company's method of internal reporting, which disaggregates its business by product category. The Company's two reportable segments are Recreational Vehicles and Housing and Building. The Company evaluates the performance of its segments based primarily on net sales and pre-tax income and allocates resources to them based on performance. The Company allocates certain corporate expenses to these segments based on three dimensions: revenues, subsidiary structure and number of employees. In addition, the data excludes the results of the discontinued operations (see Note 9). Differences between reported segment amounts and corresponding consolidated totals represent corporate income or expenses for administrative functions and income, costs or expenses relating to property and equipment that are not allocated to segments.

The table below presents information about segments, used by the chief operating decision maker of the Company for the three months ended March 31 (in thousands):

	Three Months Ended March 31,
	2006			2005
Net sales:
Recreational vehicles	$	119,854		$	153,695
Housing and building		42,700			38,554
Consolidated total	$	162,554		$	192,249
Gross profit
Recreational vehicles	$	4,980		$	11,154
Housing and building		9,662			7,564
Other reconciling items		-			67
Total	$	14,642		$	18,785
Operating expenses
Recreational vehicles	$	7,327		$	12,853
Housing and building		9,555			10,705
Other reconciling items		(3,300	)		(3,364	)
Total	$	13,582		$	20,194

- 6 -

	Three Months Ended March 31,
	2006			2005
Operating income/(loss)
Recreational vehicles	$	(2,347	)	$	(1,699	)
Housing and building		107			(3,141	)
Other reconciling items		3,300			3,431
Total	$	1,060		$	(1,409	)
Pre-tax income/(loss) from continuing operations
Recreational vehicles	$	(2,668	)	$	(1,863	)
Housing and building		142			(3,031	)
Other reconciling items		3,144			3,477
Total	$	618		$	(1,417	)
		March 31,			December 31,
Total assets		2006			2005
Recreational vehicles	$	152,483		$	152,501
Housing and building		71,090			83,338
Other reconciling items		90,904			86,977
Total	$	314,477		$	322,816

3.    INVENTORIES.

Inventories consist of the following (in thousands):

	March 31,		December 31,
	2006		2005
Raw materials
Recreational vehicles	$	20,602	$	19,770
Housing and building		8,430		13,643
Total		29,032		33,413
Work in process
Recreational vehicle		22,050		15,515
Housing and building		4,389		5,280
Total		26,439		20,795
Improved lots
Housing and building		249		261
Total		249		261
Finished goods
Recreational vehicle		45,500		48,935
Housing and building		13,760		17,900
Total		59,260		66,835
Total	$	114,980	$	121,304

- 7 -

4.    PROPERTY, PLANT AND EQUIPMENT.

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

	March 31, 2006		December 31, 2005
Land and improvements	$	12,032	$	13,255
Buildings and improvements		62,943		68,007
Machinery and equipment		23,688		31,468
Transportation equipment		15,728		16,279
Office furniture and fixtures		17,800		19,080
Total		132,191		148,089
Less, accumulated depreciation		71,351		80,508
Property, plant and equipment, net	$	60,840	$	67,581

5.    ACCRUED EXPENSES AND OTHER LIABILITIES.

Accrued expenses and other liabilities consist of the following (in thousands):

	March 31, 2006		December 31, 2005
Wages, salaries, bonuses and commissions	$	2,626	$	3,156
Dealer incentives, including volume bonuses, dealer trips, interest reimbursement, co-op advertising and other rebates		6,000		4,284
Warranty		16,605		20,005
Insurance-products and general liability, workers compensation, group health and other		7,769		6,833
Customer deposits and unearned revenues		5,039		10,029
Litigation		3,877		3,740
Interest		1,274		1,980
Sales and property taxes		1,806		1,948
Other current liabilities		2,648		2,881
Total	$	47,644	$	54,856

- 8 -

Changes in the Company's warranty liability during the three-month periods ended March 31, 2006 and 2005 were as follows (in thousands):

	Three Months Ended March 31,
	2006			2005
Balance of accrued warranty at beginning of period	$	20,005		$	10,140
Warranties issued during the period and changes in liability for pre-existing warranties		6,536			5,276
Settlements made during the period		(9,936	)		(5,100	)
Balance of accrued warranty at March 31	$	16,605		$	10,316

The increase in the warranty accrual for 2006 is primarily the result of specific reserves established in the later half of 2005 related to the recall of defective camping trailer lift systems and the repair of defective material used in laminated sidewalls of certain of the Company’s recreational vehicles.

6.    COMPREHENSIVE INCOME (LOSS).

The changes in the components of comprehensive income (loss) for the three months ended March 31 are as follows (in thousands):

	Three Months Ended March 31,
	2006		2005
Net income (loss)	$	2,910	$	(1,386	)
Unrealized losses on securities held for sale, net of taxes		-		(131	)
Unrealized gains (losses) on cash flow hedges, net of taxes		18		59
Comprehensive income (loss)	$	2,928	$	(1,458	)

As of March 31, 2006 and 2005, the accumulated other comprehensive income, net of tax, relating to unrealized gains on securities available for sale was $0 and $57,000, respectively, and relating to deferred losses on cash flow hedges was $12,000 and ($37,000), respectively.

7.    EARNINGS PER SHARE.

Basic earnings per share is based on the weighted average number of shares outstanding during the period. Diluted earnings per common share is based on the weighted average number of shares outstanding during the period, after consideration of the dilutive effect of stock options and awards and shares held in deferred compensation plans. Basic and diluted earnings per share for the three-month period ended March 31 were calculated using the average shares as follows (in thousands):

	Three Months Ended March 31,
	2006		2005
Numerator:
Net income (loss) available to common stockholders	$	2,910	$	(1,386	)
Denominator:
Number of shares outstanding, end of period:
Weighted average number of common shares used in basic EPS		15,593		15,526
Effect of dilutive securities		57		-
Weighted average number of common shares used in diluted EPS		15,650		15,526

- 9 -

For the quarter ended March 31, 2006, 73,075 shares,of outstanding stock options were not included in the computation of diluted earnings per share because their exercise price was greater than the average market prices for the respective periods and their inclusion would have been antidilutive. As the Company reported a net loss for the quarter ended March 31, 2005, the dilutive effect of stock options and awards did not enter into the computation of diluted earnings per share because their inclusion would have been antidilutive.

8.   INCOME TAXES.

For the first quarter ended March 31, 2006, the effective tax rate was 34.6% compared with a 2005 first quarter effective tax rate from continuing operations of 35.5%. The Company’s effective tax rate fluctuates based upon income levels, the states where sales occur, the amount of export sales, nontaxable dividends on investments, nontaxable increases in cash value of life insurance contracts and recognized federal and state tax credits.

During the first quarter of 2006, the Company recorded a decrease in current deferred tax assets of $0.3 million and a decrease in long-term deferred tax assets of $1.4 million to recognize deferrals that can be utilized as a result of the sale of Miller Building Systems, Inc.

9. RESTRUCTURING CHARGES AND DISCONTINUED OPERATIONS.

During 2005, the Company’s Board of Directors approved a comprehensive operational and cost structure realignment and restructuring plan (the Intensive Recovery Plan), which is intended to improve operating performance and ensure financial strength.

When describing the impact of these restructuring plans, determinations of the fair value of long-lived assets were based upon comparable market values for similar assets.

On March 31, 2006, the Company completed the sale of a property located in Grapevine, Texas for approximately $2.0 million, consisting of cash of $1.7 million and a note receivable of $0.3 million and resulting in a pre-tax gain of approximately $1.8 million. Also during the quarter, the Company completed the sale of vacant farmland in Middlebury, Indiana for cash of approximately $1.0 million, resulting in a pre-tax gain of approximately $0.8 million.

During 2005, approximately 140 salaried positions were eliminated throughout the Company. Severance costs related to the eliminations were approximately $0.7 million, of which $0.5 million was paid by December 31, 2005 and $0.2 million will be paid during 2006.

Housing and Building Segment

The Company is in the latter stages of closing the All American Homes operation in Springfield, Tennessee. The pending closure of the Tennessee location resulted in an asset impairment charge of approximately $1.1 million which was recorded in the third quarter of 2005.The closure of the Tennessee facility should have minimal impact on revenues, as all existing builders in that region will continue to be served by the Company’s housing operations in Indiana, Ohio and North Carolina, but should improve profitability by eliminating the possibility of further losses at this location. On March 15, 2006, the Company entered into a definitive agreement for the sale of the Tennessee facilities for $5.3 million in cash. The sale of the Tennessee property is subject to certain customary conditions, and closing is anticipated to occur in late June or early July. The property, plant and equipment of the Tennessee facility has been classified as held for sale in the accompanying balance sheet as of March 31, 2006.

On December 31, 2005, the Company sold all operating assets of the All American Homes Kansas division. In accordance with Statement of Financial Accounting Standard No. 144, the division qualified as a separate component of the Company’s business and as a result, the operating results of the division have been accounted for as a discontinued operation. Previously reported financial results for all periods presented have been restated to reflect this business as a discontinued operation. Net sales of the Kansas division for the quarter ended March 31, 2005, were $2.3 million, and the pre-tax loss for the quarter ended March 31, 2005 was $(0.2) million.

On March 31, 2006, The Company sold 100% of its interest in the capital stock of Miller Building Systems, Inc. for $11.5 million, consisting of cash of $9.0 and a $2.5 million secured note. The note is to be repaid over 5 years and bears interest at the 1 year LIBOR rate plus 2.75% per annum with quarterly interest payments beginning September 30, 2006. Principal payments of $125,000 per quarter commence on June 30, 2009 and continue through the maturity date of March 31, 2011. In addition, the Company accepted a $2.0 million contingent earn-out note which will be paid to Company if certain income metrics are achieved by the acquiring entity. In accordance with Statement of Financial Accounting Standard No. 144, the division qualified as a separate component of the Company’s business and as a result, the operating results of the division have been accounted for as a discontinued operation. Previously reported financial results for all periods presented have been restated to reflect this business as a discontinued operation. Net sales of Miller Building Systems, Inc. for the quarter ended March 31, 2005 were $7.0 million, and the pre-tax loss for the quarter ended March 31, 2005, was $(0.7) million. In connection with the sale of Miller Buildings Systems, $1.7 million of industrial revenue bonds were paid off as of March 31, 2006. In addition, subsequent to March 31, 2006, the Company terminated the $1.5 million and $235,000, interest rate swaps which had been associated with these revenue bonds.

- 10 -

In conjunction with the actions noted above, during the fourth quarter of 2005 management allocated goodwill of $0.7 million to the discontinued operations from the Housing and Building Segment goodwill based on the relative fair value of the discontinued operations to the entire Housing and Building Segment. The $0.7 million of allocated goodwill consisted of $0.6 million allocated to Miller Building Systems, which was written off as part of the 2005 loss from operations of discontinued operations and $0.1 million allocated to All American Homes of Kansas, which was included in the 2005 loss on sale of assets of discontinued operations. During the first quarter of 2006, an additional $0.3 million of goodwill was allocated to Miller Building Systems based on the final sales price relative to the fair value of the entire Housing and Building Segment. The additional $0.3 million of allocated goodwill was written off as part of the 2006 gain on sale of assets of discontinued operations.

Assets and liabilities of the All American Homes of Kansas and Miller Building Systems disposal groups, which are included in the consolidated balance sheet, were as follows at December 31, 2005 (in thousands):

	2005
Cash	$	242
Accounts and other receivables		4,401
Prepaid Expenses		510
Inventories		10,423
Other long-term assets		124
Fixed assets		34
Accounts payable		(1,777	)
Other current liabilities		(5,341	)
Net assets held for sale	$	8,616

Recreational Vehicle Segment

On January 13, 2006, the Company sold all operating assets of Prodesign, LLC. The total sales price was $8.2 million, of which the Company received $5.7 million in cash, a $2.0 million promissory note and $0.5 million to be held in escrow to cover potential warranty claims and uncollectible accounts receivable, as defined in the sale agreement. The promissory note is to be repaid over a period of 10 years, using an amortization period of 15 years, and bears interest at 6% per annum with interest only payments being required in the first three years. Any funds remaining in the escrow account after a period of 13 months will revert to the Company. In accordance with Statement of Financial Accounting Standard No. 144, Prodesign qualified as a separate component of the Company’s business and as a result, the operating results of Prodesign have been accounted for as a discontinued operation. Previously reported financial results for all periods presented have been restated to reflect this business as a discontinued operation. In conjunction with the classification of Prodesign as a discontinued operation, management allocated goodwill of $0.3 million to the discontinued operations from the Recreational Vehicle Segment goodwill based on the relative fair value of the discontinued operations to the Recreational Vehicle Segment. The $0.3 million of allocated goodwill has been included in the calculation of the final gain on sale of assets in the first quarter of 2006. Net sales of Prodesign for the quarter ended March 31, 2005, were $3.6 million and the pre-tax income for the quarter ended March 31, 2005, was $0.2 million.

Assets and liabilities of the Prodesign disposal group, which are included in the consolidated balance sheet, were as follows at December 31, 2005 (in thousands):

	2005
Accounts and other receivables	$	781
Prepaid expenses		51
Inventories		909
Other long-term assets		437
Fixed assets		4,144
Accounts payable		(116	)
Other current liabilities		(495	)
Net assets held for sale	$	5,711

- 11 -

10.  COMMITMENTS AND CONTINGENCIES.

Obligation to Purchase Consigned Inventories

The Company obtains vehicle chassis for its recreational vehicle products directly from automobile manufacturers under converter pool agreements. The agreements generally provide that the manufacturer will provide a supply of chassis at the Company's various production facilities under the terms and conditions as set forth in the agreement. Chassis are accounted for as consigned inventory until either assigned to a unit in the production process or 90 days have passed. At the earlier of these dates, the Company is obligated to purchase the chassis and it is recorded as inventory. At March 31, 2006 and December 31, 2005 chassis inventory, accounted for as consigned inventory, approximated $11.5 million and $26.8 million, respectively.

Repurchase Agreements

The Company was contingently liable at March 31, 2006 to banks and other financial institutions on repurchase agreements in connection with financing provided by such institutions to most of the Company's independent dealers in connection with their purchase of the Company's recreational vehicle products. These agreements provide for the Company to repurchase its products from the financing institution in the event that they have repossessed them upon a dealer's default. Products repurchased from dealers under these agreements are accounted for as a reduction in revenue at the time of repurchase. Although the estimated contingent liability approximates $237 million at March 31, 2006 ($262 million at December 31, 2005), the risk of loss resulting from these agreements is spread over the Company's numerous dealers and is further reduced by the resale value of the products repurchased. Based on losses previously experienced under these obligations, the Company has established a reserve for estimated losses under repurchase agreements. At March 31, 2006 and December 31, 2005, $0.5 million and $0.4 million, respectively, was recorded as an accrual for estimated losses under repurchase agreements.

The Company was also contingently liable at March 31, 2006 to a financial institution on repurchase agreements in connection with financing provided by the institution to certain of the Company's independent home builders in connection with their purchase of the Company's housing products. This agreement provides for the Company to repurchase its products from the financing institution in the event that they have repossessed them upon a builder's default. Products repurchased from builders under this agreement are accounted for as a reduction in revenue at the time of repurchase. Although the estimated contingent liability approximates $19.3 million at March 31, 2006 ($15.9 million at December 31, 2005), the risk of loss resulting from these agreements is spread over the Company's numerous builders and is further reduced by the resale value of the products repurchased. The Company has evaluated the potential for losses under this agreement and has recorded an accrual of $0.2 million March 31, 2006 and December 31, 2005 for estimated losses under the repurchase agreement.

Corporate Guarantees

The Company was contingently liable under guarantees to financial institutions of their loans to independent dealers for amounts totaling approximately $9.3 at March 31, 2006 and $6.2 million at December 31, 2005. The Company has an agreement with a financial institution to form a private-label financing program to provide wholesale inventory financing to the Company's dealers in the Recreational Vehicle Segment. The agreement provides for a preferred program that provides financing that is subject to the standard repurchase agreement described above. In addition, the agreement provides for a reserve pool whereby the financial institution makes available an aggregate line of credit not to exceed $40 million that will provide financing for dealers that may not otherwise qualify for credit approval under the preferred program. No dealer being provided financing from the reserve pool can receive an aggregate line of credit exceeding $5 million. In addition to the standard repurchase agreement described above, for 2006 the Company will be contingently liable to the financial institutions up to a maximum of $2.4 million of aggregate losses, as defined by the agreement, incurred by the financial institutions on designated dealers with higher credit risks that are accepted into the reserve pool financing program. After 2006, the Company will be liable up to a maximum of $2 million of aggregate losses. The Company has recorded a loss reserve of $0.1 million at March 31, 2006 and December 31, 2005 associated with these guarantees.

- 12 -

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

In addition, the Company is liable under a guarantee to a financial institution for model home financing provided to certain independent builders doing business with the Company's Housing and Building Segment. The amount outstanding under this agreementat March 31, 2006 is $0.5 million ($0.6 million at December 31, 2005). Any losses incurred under this guarantee would be offset by the proceeds from the resale of the model home and losses are limited to 20% of the original contract price, and cannot exceed a total of $2.0 million. As of March 31, 2006, no losses have been incurred by the Company under the model home financing program.

Financing Obligation

During the second quarter of 2004, the Company entered into an agreement to provide financing of up to $4.9 million to a developer for the construction of a hotel for which the Company was to provide modular units. The construction loan may be converted to a term loan for a period of two years, subject to the terms and conditions of the agreement. The loans are collateralized by a first priority interest in all tangible and intangible property of the borrower. As of March 31, 2006, the Company provided $2.3 million in financing to the developer under these arrangements. The developer is now unable to obtain a building permit, so the Company has moved to foreclose on the land acquired for the hotel site, to recoup the financing extended to date. No additional funding will be provided.

Litigation

In January 2004, the Company entered into a long-term exclusive licensing agreement with The Coleman Company, Inc. to design, produce and market a full line of new Coleman® brand recreational vehicles. In November 2004, the judge presiding over the legal dispute between Fleetwood Enterprises, Inc. and The Coleman Company, Inc. entered an order granting Fleetwood’s request for an injunction against Coleman, prohibiting their use of the trademark registration “Coleman” in the recreational vehicle industry. To protect its rights under its existing license agreement with Coleman, Consolidated Leisure Industries, LLC, doing business as the Coachmen RV Group, filed suit against The Coleman Company, Inc. in federal court in Kansas City, Kansas, to enforce its rights under the License Agreement.

On March 21, 2005, the Company entered into a settlement agreement with The Coleman Company, Inc. to resolve the licensing agreement suit. Pursuant to the settlement agreement, the Company has received $4,425,000 from The Coleman Company, Inc. in exchange for releasing all claims in the suit. The settlement of $4,425,000 was paid in two installments of $2,212,500, one of which was received by the Company on March 23, 2005 and the second of which was received on April 20, 2005, plus interest. In addition, the agreement provides for the potential of an additional payment of $500,000 if certain provisions of the agreement are breached. The settlement of $4,425,000 was recorded in 2005 as a reduction of $1,721,000 to cost of sales and a reduction of $461,000 to operating expenses at the RV Segment plus a reduction of $2,243,000 to the Company’s general and administrative expenses.

During 2005, the Company settled a personal injury suit for $5,000,000, $1,000,000 of which was paid by the Company’s primary insurance carrier. The Company’s self-insured retention is $250,000. During 2005, the Company paid $1,500,000 in addition to the amount paid by its primary carrier and recorded an other current liability of $2,500,000 to recognize the remaining amount to be paid on the settlement and the $250,000 retention. Since the excess carrier initially denied coverage, the Company filed suit against the excess carrier to enforce coverage. During the first quarter, the matter was settled for $2,875,000, which the Company received on March 15, 2006 and which was recorded as a reduction to the RV Segment’s general and administrative expenses. There remains ongoing litigation against other parties to recover the balance over the retention.

During the first quarter, the Company also entered into a partial settlement of another insurance matter for $745,000, net of a contingency fee.  This amount was recorded as a reduction to the Company's general and administrative expenses.

The Company is currently in arbitration with a housing customer over the terms of a construction contract. Arbitration is anticipated to be completed in the first half of 2006. As of March 31, 2006, the Company has accrued an amount for which management believes the arbitration will be settled, however, there is a potential for exposure in excess of the amount accrued.

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

- 13 -

11.  STOCK-BASED COMPENSATION.

Prior to January 1, 2006, the Company accounted for its stock-based compensation plans under the recognition and measurement provision of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation. No stock-based employee compensation cost was recognized in the Statement of Operations for the three month period ended March 31, 2005, as all options granted under the stock-based compensation plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment, using the modified-prospective-transition method and accordingly, the Company has not restated the consolidated results of income from prior interim periods and fiscal years. Under SFAS 123R, the Company is required to measure compensation cost for all stock-based awards at fair value on date of grant and recognize compensation expense over the period that the awards are expected to vest. Restricted stock and stock options issued under the Company’s equity plans as well as stock purchases under the employee stock purchase plan are subject to the provisions of SFAS 123R. Since the adoption of SFAS 123R, there have been no modifications to outstanding stock-based awards.

Prior to the adoption of Statement 123(R), the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Statement of Cash Flows. Statement 123(R) requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. Excess tax benefits for the three month period ended March 31, 2006 were not significant.

Stock options generally vest over a four-year service period. The Company has not granted any stock option awards since 2003. The remaining unvested stock options, net of forfeitures, at January 1, 2006 were not significant. Compensation expense related to the Company's Employee Stock Purchase Plan was not significant for the first quarter of 2006.

On March 31, 2006, the Company granted Restricted Stock Awards to certain key employees as a means of retaining and rewarding them for performance and to increase their ownership in the Company. The awards are governed by the Company’s 2000 Omnibus Stock Plan. Participants will earn the restricted shares awarded to them based on attainment of certain performance goals for the calendar year 2006. If the Company meets 50%, 75% or 100% of the performance goal established, the participants will earn the corresponding percentage of their restricted shares. To the extent the Company meets the performance goals for the year, and the participant remains employed by the Company during the vesting period, the earned restricted shares will vest and be delivered to the Participants over a three-year vesting period: one-third on January 1, 2007, one-third on January 1, 2008 and one-third on January 1, 2009. Compensation expense is recognized on a straight-line basis over the requisite service period as the awards contingently vest over the performance and service periods. A total of 110,000 shares, assuming 100% of the performance goal is achieved, were granted with a weighted average grant-date fair value of $11.05 per share. At March 31, 2006, the Company determined that it was not yet probable that 50% of the performance goal would be achieved; therefore, no compensation expense was recorded related to this plan for the quarter ended March 31, 2006. Either due to termination of employment or as a condition to receiving the 2006 Restricted Stock Awards, the participants forfeited all rights to the 99,600 shares and 75,600 shares awarded in 2004 and 2005, respectively, under the Performance Based Restricted Stock Plan. Shares awarded under this plan in 2003 were forfeited as of December 31, 2005 due to failure to meet the performance goals.

During the period ended March 31, 2005, the Company had determined that it was probable that the performance requirements of the 2003 Performance Based Restricted Stock Plan would not be achieved and as a result, reversed the expenses which had been recorded related to this plan. For the period ended March 31, 2005, the Company reduced compensation expense, which is a component of general and administrative expenses, by $758,000 related to these programs.

Prior to January 1, 2006, the Company accounted for employee stock-based compensation using the intrinsic method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) as permitted by SFAS 123, Accounting for Stock-Based Compensation (SFAS 123), and SFAS 148, Accounting for Stock-Based Compensation — Transition and Disclosure. Under the intrinsic method, the difference between the market price on the date of grant and the exercise price is charged to the results of operations over the vesting period on a straight-line method. Accordingly, the Company was not required to recognize compensation cost for stock options issued to employees or shares issued under the employee stock purchase plan. Prior to the adoption of SFAS 123R, the Company recognized compensation cost only for restricted stock.

- 14 -

For the quarter ended March 31, 2005, had the Company accounted for all employee stock-based compensation based on the estimated grant date fair values, as defined by SFAS 123, the Company’s net income and net income per share would have been adjusted to the following pro forma amounts (in thousands, except per share data):

	Three Months Ended
	March 31, 2005
Net loss, as reported	$	(1,386	)
Add: stock-based compensation expense under variable plan included in reporting net income, net of taxes		(489	)
Deduct: total stock-based compensation expense determined under fair value based method for all awards, net of taxes		291
Pro forma net income (loss)	$	(1,584	)
Earnings per share:
Basic - as reported	$	(0.09	)
Basic - pro forma	$	(0.10	)
Diluted - as reported	$	(0.09	)
Diluted - pro forma	$	(0.10	)

- 15 -

Coachmen Industries, Inc. and Subsidiaries

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

The following is management’s discussion and analysis of certain significant factors, which have affected the Company’s financial condition, results of operations and cash flows during the periods included in the accompanying consolidated financial statements.

A summary of the changes in the principal items included in the consolidated statements of operations is shown below (dollar amounts in thousands).

		Comparison of Three Months
		Ended March 31, 2006 and 2005
		Increases (Decreases)
		Amount		Percentage
Net sales	$	(29,695	)	(15.4	)%
Cost of sales		(25,552	)	(14.7	)
Delivery expenses		108		1.3
Selling expenses		(2,114	)	(29.0	)
General and administrative expenses		(1,932	)	(40.4	)
Gain on sale of assets, net		2,674		n/m
Interest expense		75		8.4
Investment income		(455	)	(55.7	)
Other income, net		96		n/m
Income from continuing operations before income taxes		2,035		143.6
Income taxes		678		146.1
Net income from continuing operations		1,357		142.3
Income from discontinued operations, net of taxes		2,939		n/m
Net income (loss)		4,296		309.9

  n/m - not meaningful

- 16 -

NET SALES

Consolidated net sales from continuing operations for the quarter ended March 31, 2006 were $162.6 million, a decrease of $29.7 million, or 15.4%, from the $192.2 million reported for the corresponding quarter last year. The Company’s Recreational Vehicles segment experienced a net sales decrease of 22.0% for the quarter. The industry-wide weakness in Class A motorized products continued in the first quarter. For the quarter, RV Segment wholesale unit shipments of all product types increased by 0.4% to 4,808 units. Shipments of motorized products fell 32.9% to 1,090 units, while shipments of non-motorized products increased by 17.5% to 3,718 units. Through February, industry wholesale shipments of Class A motorhomes declined 20.6%, while Class A retail registrations as reported by Statistical Surveys, Inc. declined 24.9% through February. Shipments of the Company’s Travel Trailers increased 38.0% due to the market success of its redesigned 2006 models, as well as orders for temporary housing units in hurricane affected areas in the Gulf region. Coachmen received orders for approximately 3,500 “FEMA”-related units with a value of approximately $36 million, most of which were delivered by the end of 2005. The RV Segment delivered the remaining 1,100 units in the first quarter. Backlog for the RV segment, in dollars, decreased to $57.7 million from $90.9 million a year ago. Backlogs in units rose 36.5%, primarily due to the increase of travel trailer orders from dealers.

The Company’s housing and building segment experienced a net sales increase for the quarter ended March 31, 2006 of 10.8%, from $38.6 million during the first quarter of 2005 to $42.7 million for the first quarter of 2006. Wholesale unit shipments were down 3.4% for the quarter. Despite the decline in unit shipments, the Segment’s revenues were driven by a 26.4% increase in average revenues per unit due to a shift in product mix and incremental revenues from large scale projects. Backlog for the housing and building segment as of March 31, 2006 have increased 1.5% to $38.0 million, compared with $37.4 million at March 31, 2005.

In order to supplement the Company’s single-family residential housing business, the Housing and Building Segment continues to pursue opportunities for larger projects in multifamily residential and commercial markets. In the first quarter, the Company’s All American Building Systems (AABS) commercial business unit completed a number of projects, including a $1.2 million condominium project in the Florida Keys and the $4.5 million military housing project at Fort Bliss in Texas. AABS also began construction on a $1.9 million project to provide single-family luxury lake homes in South Carolina during the first quarter. The Group is pursuing a number of exciting opportunities, including additional military housing projects. The initial project at Fort Bliss was successfully completed, and represents the Group’s first entry into the expanding military housing market. AABS is now pursuing follow-on projects for additional barracks as well as single-family and multi-family housing projects at a number of military installations. AABS is also pursuing incremental projects for student housing at a number of institutions in the eastern United States.

COST OF SALES

Cost of sales decreased 14.7%, or $25.6 million, for the three months ended March 31, 2006. As a percentage of net sales, cost of sales was 91.0% for the three-month period ended March 31, 2006 compared to 90.2% for the three months ended March 31, 2005. The change in the dollar amount of cost of sales in the current quarter is attributable to the decrease in sales dollars offset by higher insurance, utility and warranty costs. In addition, reductions in the production levels caused lower overhead absorption and labor inefficiencies in 2006 while 2005 cost of sales were reduced by $1.7 million due to the settlement of a litigation matter.

OPERATING EXPENSES

As a percentage of net sales, operating expenses, which include delivery, selling, general and administrative expenses, were 10.0% and 10.5% for the three-month periods ended March 31, 2006 and 2005, respectively. As a percentage of sales, delivery expenses increased by 0.9 percentage points for the three-month period of 2006 as compared to the prior year three-month period. The increase in delivery expense as a percent of sales during the quarter was primarily related to higher fuel costs, contract labor and crane rental costs related to delivery and setting of housing and building units.

Selling expenses were 3.2% of net sales for the 2006 quarter compared to 3.8% of net sales for the three-month period ended March 31, 2005. The decrease in selling expense as a percentage of net sales during the quarter is related to decreased payroll expenses, due to the reduction in force which occurred in 2005, as well as due to decreased expenses related to product shows, literature and other promotional expenses.

General and administrative expenses were 1.8% of net sales for the quarter compared to 2.5% for the 2005 corresponding quarter. The decrease in expenses for the three-month period was primarily the result of two legal settlements received during the quarter which totaled $3.6 million, but that were partially offset by other legal fees. In addition, payroll costs decreased during the first quarter of 2006 as compared to the first quarter of 2005 due to the reduction of force that occurred in 2005.

- 17 -

GAIN ON THE SALE OF ASSETS, NET

For the three months ended March 31, 2006, the gain on the sale of assets was $2.7 million. On March 31, 2006 the Company completed the sale of a property located in Grapevine, Texas for $2.0 million, which resulted in a gain of $1.8 million. Also during the quarter, the Company completed the sale of vacant farmland in Middlebury, Indiana for $1.0 million, which resulted in a gain of $0.8 million. There were no significant gains or losses from property transactions for the three months ended March 31, 2005.

INTEREST EXPENSE

Interest expense was $1.0 million and $0.9 million for the three-month periods ended March 31, 2006 and 2005, respectively. Interest expense increased slightly based on the higher applicable interest rates.

INVESTMENT INCOME

There was a net investment income of $0.4 for the quarter ended March 31, 2006 compared to $0.8 in the same quarter of 2005. Investment income is principally attributable to earnings of the life insurance policies held and in 2005 also included realized gains on the sale of preferred stock.

OTHER INCOME, NET

Other income, net, represents income of $0.2 million for the first quarter of 2006 and income of $0.1 million for the same quarter of the previous year. No items of significance caused the variances between the comparable quarters.

INCOME TAXES

For the first quarter ended March 31, 2006, the effective tax rate was 34.6% compared with a 2005 first quarter effective tax rate from continuing operations of 35.5%. The Company’s effective tax rate fluctuates based upon income levels, the states where sales occur, the amount of export sales, nontaxable dividends on investments, nontaxable increases in cash value of life insurance contracts and recognized federal and state tax credits.

During the first quarter of 2006, the Company recorded a decrease in current deferred tax assets of $0.3 million and a decrease in long-term deferred tax assets of $1.4 million to recognize deferrals that can be utilized as a result of the sale of Miller Building Systems, Inc.

DISCONTINUED OPERATIONS

On January 13, 2006, the Company sold all operating assets of Prodesign, LLC. The total sales price was $8.2 million, of which the Company received $5.7 million in cash, a $2.0 million promissory note and $0.5 million to be held in escrow to cover potential warranty claims and uncollectible accounts receivable, as defined in the sale agreement. The promissory note is to be repaid over a period of 10 years, using an amortization period of 15 years, and bears interest at 6% per annum with interest only payments being required in the first three years. Any funds remaining in the escrow account after a period of 13 months will revert to the Company. In accordance with Statement of Financial Accounting Standard No. 144, Prodesign qualified as a separate component of the Company’s business and as a result, the operating results of Prodesign have been accounted for as a discontinued operation. Previously reported financial results for all periods presented have been restated to reflect this business as a discontinued operation. In conjunction with the classification of Prodesign as a discontinued operation, management allocated goodwill of $0.3 million to the discontinued operations from the Recreational Vehicle Segment goodwill based on the relative fair value of the discontinued operations to the Recreational Vehicle Segment. The $0.3 million of allocated goodwill has been included in the calculation of the final gain on sale of assets in the first quarter of 2006. Net sales of Prodesign for the quarter ended March 31, 2005, were $3.6 million and the pre-tax income for the quarter ended March 31, 2005, was $0.2 million.

- 18 -

On March 31, 2006, The Company sold 100% of its interest in the capital stock of Miller Building Systems, Inc. for $11.5 million, consisting of cash of $9.0 and a $2.5 million secured note. The note is to be repaid over 5 years and bears interest at the 1 year LIBOR rate plus 2.75% per annum with quarterly interest payments beginning September 30, 2006. Principal payments of $125,000 per quarter commence on June 30, 2009 and continue through the maturity date of March 31, 2011. In addition, the Company accepted a $2.0 million contingent earn-out note which will be paid to Company if certain income metrics are achieved by the acquiring entity. In accordance with Statement of Financial Accounting Standard No. 144, the division qualified as a separate component of the Company’s business and as a result, the operating results of the division have been accounted for as a discontinued operation. Previously reported financial results for all periods presented have been restated to reflect this business as a discontinued operation. Net sales of Miller Building Systems, Inc. for the quarter ended March 31, 2005 were $7.0 million, and the pre-tax loss for the quarter ended March 31, 2005, was $(0.7) million. In connection with the sale of Miller Buildings Systems, $1.7 million of industrial revenue bonds were paid off as of March 31, 2005. In addition, subsequent to March 31, 2005, the Company terminated the $1.5 million and $235,000, interest rate swaps which had been associated with these revenue bonds.

In conjunction with the actions noted above, during the fourth quarter of 2005 management allocated goodwill of $0.7 million to the discontinued operations from the Housing and Building Segment goodwill based on the relative fair value of the discontinued operations to the entire Housing and Building Segment. The $0.7 million of allocated goodwill consisted of $0.6 million allocated to Miller Building Systems, which was written off as part of the 2005 loss from operations of discontinued operations and $0.1 million allocated to All American Homes of Kansas, which was included in the 2005 loss on sale of assets of discontinued operations. During the first quarter of 2006, an additional $0.3 million of goodwill was allocated to Miller Building Systems based on the final sales price relative to the fair value of the entire Housing and Building Segment. The additional $0.3 million of allocated goodwill was written off as part of the 2006 gain on sale of assets of discontinued operations.

On December 31, 2005, the Company sold all operating assets of the All American Homes Kansas division. In accordance with Statement of Financial Accounting Standard No. 144, the division qualified as a separate component of the Company’s business and as a result, the operating results of the division have been accounted for as a discontinued operation. Previously reported financial results for all periods presented have been restated to reflect this business as a discontinued operation. Net sales of the Kansas division for the quarter ended March 31, 2005, were $2.3 million, and the pre-tax loss for the quarter ended March 31, 2005 was $(0.2) million.

NET INCOME (LOSS)

Net income from continuing operations for the quarter ended March 31, 2006 was $0.4 million (earnings of $0.03 per diluted share) compared to a net loss from continuing operations for the quarter ended March 31, 2005 of $1.0 million (a loss of $0.06 per diluted shared). Net income for the quarter ended March 31, 2006 was $2.9 million (earnings of $0.19 per diluted share) compared to a net loss of $1.4 million (a loss of $0.09 per diluted share) for 2005.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

The Company generally relies on funds from operations as its primary source of liquidity. In addition, the Company maintains a $35 million, unsecured revolving credit facility, which expires on June 30, 2006, to meet its seasonal working capital needs. The Company is currently in the process of renegotiating its credit facility and anticipates securing a credit facility with comparable terms. At March 31, 2006, there were no outstanding borrowings against the existing bank line of credit. The Company was in compliance with all debt covenant requirements under the revolving credit agreement, as amended, at March 31, 2006. At December 31, 2005, there were short-term borrowings of $12.3 million outstanding. During 2004, the Company also borrowed against the cash surrender value of the Company’s investments in life insurance contracts. As of March 31, 2006 and December 31, 2005, $15 million had been borrowed against the cash surrender value of Company-owned life insurance contracts.

At March 31, 2006, working capital increased to $94.0 million from $93.0 million at December 31, 2005. The $8.5 million decrease in current assets at March 31, 2006 versus December 31, 2005 was primarily due to the sale of Miller Building Systems, Inc. and Prodesign, LLC, offset by increases in inventories at the remaining subsidiaries. Likewise, the $9.5 million decrease in current liabilities at March 31, 2006 versus December 31, 2005 was also due to the sale of Miller Building Systems, offset by an increase in trade payables.

Management believes that the Company’s existing cash and cash equivalents as of March 31, 2006, together with its available revolving credit facility and cash expected to be generated from future operations, will be sufficient to fund future planned capital expenditures and other operating cash requirements for the foreseeable future.

- 19 -

CRITICAL ACCOUNTING POLICIES

The preparation of the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from the Company's estimates. However, actual results may differ from these estimates under different assumptions or conditions. A summary of the Company’s more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in the Company’s 10-K report for the year ended December 31, 2005. During the first three months of fiscal 2006, there was no material change in the accounting policies and assumptions previously disclosed.

FORWARD-LOOKING STATEMENTS

This Form 10-Q Report contains certain statements that are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on management’s expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks and uncertainties, and are dependent on various factors, many of which are outside the control of the Company. These uncertainties and other factors include, but are not limited to:

·   the potential fluctuations in the Company’s operating results;

·   the availability for floorplan financing for the Company's recreational vehicle dealers and corresponding availability of cash to the Company;

·   uncertainties regarding the impact on sales of the disclosed restructuring steps in both the Recreational Vehicle and Housing and Building Segments;

·   the ability to sell and close the operations for sale as described;

·   the accuracy of the estimates of the costs to remedy the disclosed recreational vehicle warranty issues;

·   price volatility of materials used in production and the ability to pass on rapidly increasing costs of product components and raw materials to end buyers;

·   uncertainties and timing with respect to sales resulting from recovery efforts in the Gulf Coast;

·   the availability and price of gasoline and diesel fuel, which can impact the sale of recreational vehicles;

·   the Company's dependence on chassis and other suppliers;

·   interest rates, which affect the affordability of the Company's products;

·   the availability and cost of real estate for residential housing;

·   the increased size and scope of work of commercial and military housing projects as compared to the Company's traditional single family homes business; 

·   the ability of the Housing and Building Segment to perform in new market segments where it has limited experience;

·   adverse weather conditions affecting home deliveries;

·   potential liabilities under repurchase agreements and guarantees;

·   changing government regulations, such as those covering accounting standards;

·   environmental matters or product warranties and recalls, which may affect costs of operations, revenues, product acceptance and profitability;

·   legislation governing the relationships of the Company with its recreational vehicle dealers, which may affect the Company’s options and liabilities in the event of a general economic downturn;

·   consolidation of distribution channels in the recreational vehicle industry;

·   the impact of consumer confidence and economic uncertainty on high-cost discretionary product purchases, which can hinder the sales of recreational vehicles;

·   and also on the state of the recreational vehicle and housing industries in the United States.

Other factors affecting forward-looking statements include:

·   changes in property taxes and energy costs,

·   changes in federal income tax laws and federal mortgage financing programs, 

·   competition in the industries in which the Company operates,

·   consolidation of distribution channels in the recreational vehicle industry,

·   the Company’s ability to increase gross margins which are critical to profitability whether there are or are not increased sales,

·   the Company’s use of incentives at either the wholesale or retail level,

·   further developments in the war on terrorism and related international crises,

·   uncertainties of matters in litigation and other risks and uncertainties.

- 20 -

In addition, investors should be aware that generally accepted accounting principles prescribe when a company must disclose or reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results may therefore appear to be volatile in certain accounting periods. The foregoing lists are not exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements.

At times, the Company's actual performance differs materially from its projections and estimates regarding the economy, the recreational vehicle and building industries and other key performance indicators. Readers of this Report are cautioned that reliance on any forward-looking statements involves risks and uncertainties. Although the Company believes that the assumptions on which the forward-looking statements contained herein are reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurrence or nonoccurrence of future events. There can be no assurance that the forward-looking statements contained in this Report will prove to be accurate. The inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company's objectives will be achieved.

- 21 -

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, operations of the Company are exposed to fluctuations in interest rates. These fluctuations can vary the costs of financing and investing yields. During the first three months of 2006, the Company has utilized its revolving credit facility to meet short-term working capital needs. The Company had no outstanding borrowings against the revolving credit facility on March 31, 2006.

In January of 2003, the Company entered into various interest rate swap agreements that became effective beginning in October of 2003. These swap agreements, which are designated as cash flow hedges for accounting purposes, effectively convert a portion of the Company's variable-rate borrowings to a fixed-rate basis through November of 2011, thus reducing the impact of changes in interest rates on future interest expense. The fair value of the Company's interest rate swap agreements represents the estimated receipts or payments that would be made to terminate the agreements. A cumulative gain of $18,000, net of taxes, attributable to changes in the fair value of interest rate swap agreements was recorded as a component of accumulated other comprehensive income (loss) as of March 31, 2006. If in the future the interest rate swap agreements were determined to be ineffective or were terminated before the contractual termination dates, or if it became probable that the hedged variable cash flows associated with the variable-rate borrowings would stop, the Company would be required to reclassify into earnings all or a portion of the unrealized losses on cash flow hedges included in accumulated other comprehensive income (loss). At March 31, 2006, the Company had four interest rate swap agreements with notional amounts of $1.5 million, $235,000, $3.2 million, and $1.6 million, respectively, that were used to convert the variable interest rates on certain industrial development revenue bonds to fixed rates. In accordance with the terms of the swap agreements, the Company pays 3.39%, 3.12%, 3.71%, and 3.36% interest rates, respectively, and receives the Bond Market Association Index (BMA), calculated on the notional amounts, with net receipts or payments being recognized as adjustments to interest expense. Subsequent to March 31, 2006, the Company terminated the $1.5 million and $235,000, swaps due to the payoff of the underlying variable-rate borrowings.

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2006. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2006.

During the first quarter of 2006, the Company outsourced the processing of payroll to a third-party provider. Other than this outsourcing of payroll processing, there have been no changes during the quarter ended March 31, 2006 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 

- 22 -

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

During 2005, the Company settled a personal injury suit for $5,000,000, $1,000,000 of which was paid by the Company’s primary insurance carrier. The Company’s self-insured retention is $250,000. During 2005, the Company paid $1,500,000 in addition to the amount paid by its primary carrier and recorded an other current liability of $2,500,000 to recognize the remaining amount to be paid on the settlement and the $250,000 retention. Since the excess carrier initially denied coverage, the Company filed suit against the excess carrier to enforce coverage. During the first quarter, the matter was settled for $2,875,000, which the Company received on March 15, 2006 and which was recorded as a reduction to the RV Segment’s general and administrative expenses. There remains ongoing litigation against other parties to recover the balance over the retention.

During the first quarter, the Company also entered into a partial settlement of another insurance matter for $745,000, net of a contingency fee.  This amount was recorded as a reduction to the Company's general and administrative expenses.

Item 6. Exhibits

See Index to Exhibits incorporated by reference herein.

- 23 -

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

COACHMEN INDUSTRIES, INC.

(Registrant)

Date: May 5, 2006	By:	/s/ Claire C. Skinner
		Claire C. Skinner, Chairman of the Board and
		Chief Executive Officer
Date: May 5, 2006	By:	/s/ Richard M. Lavers
		Richard M. Lavers, Executive Vice President,
		General Counsel and Secretary, Chief Financial
		Officer and Chief Administrative Officer
Date: May 5, 2006	By:	/s/ Colleen A. Zuhl
		Colleen A. Zuhl, Chief Accounting Officer

- 24 -

INDEX TO EXHIBITS

Number Assigned In Regulation S-K, Item 601	Description of Exhibit
(3)(a)(i)	Articles of Incorporation of the Company as amended on May 30, 1995 (incorporated by reference to Exhibit 3(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
(3)(a)(ii)	Articles of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 4.2 to the Company's Form S-3 Registration Statement, File No. 333-14579).
(3)(b)	By-Laws as modified through September 9, 2005 (incorporated by reference to the Company's Form 8-K filed September 15, 2005).
(10)(a)	Form of the 2006 Restricted Stock Award Agreement and listing of the maximum number of shares each Executive Officer may earn under the Agreements.
(31.1)	Rule 13a-14(a) Certification of Chief Executive Officer.
(31.2)	Rule 13a-14(a) Certification of Chief Financial Officer.
(32.1)	Section 1350 Certification of Chief Executive Officer.
(32.2)	Section 1350 Certification of Chief Financial Officer.

   - 25 -

EX-10

     Exhibit (10)(a)

2006 RESTRICTED STOCK AWARD AGREEMENT

THIS RESTRICTED STOCK AWARD AGREEMENT (“Agreement”) is made and entered into as of this ____ day of March, 2006, by and

between COACHMEN INDUSTRIES, INC., an Indiana corporation (the "Company"), and __________, an individual (the "Participant").

WHEREAS, the Company has heretofore adopted the 2000 Omnibus Stock Plan of Coachmen Industries, Inc. (the “Plan”);

WHEREAS, the Company desires to grant an award of restricted stock to the Participant pursuant to the Plan.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, and for other good and valuable consideration, the parties do

hereby agree as follows:

1.Certain Definitions. When used herein, the following terms shall have the meanings set forth below:

A.“Change in Control” of the Company shall mean the occurrence of any of the following:

(i)any “person” (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding the Company, its affiliates, any qualified or non-qualified plan maintained by the Company or its affiliates, and any Passive Investor) becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under such Act), directly or indirectly, of securities of the Company representing more than 20% of the combined voting power of the Company’s then outstanding securities;

(ii)during a period of 24 months, a majority of the Board of Directors of the Company ceases to consist of the existing membership or successors nominated by the existing membership or their similar successors;

(iii)shareholder approval of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

(iv)shareholder approval of either (i) a complete liquidation or dissolution of the Company or (ii) a sale or other disposition of all or substantially all of the assets of the Company, or a transaction having a similar effect.

B.“Code” means the Internal Revenue Code of 1986, as amended, or any successor revenue code which may hereafter be adopted in lieu

thereof.

C.“Committee” means the Management Development/Compensation Committee of the Board of Directors of the Company.

D.“Company Stock” means shares of the Company’s common stock.

E.“Passive Investor” means any person who becomes a beneficial owner of 20% or more of the combined voting power of the Company’s

then outstanding securities solely because (i) of a change in the aggregate number of voting shares outstanding since the last date on which

the person acquired beneficial ownership of any voting shares or (ii) (A) the person acquired beneficial ownership of the shares based on

calculations correctly performed and using the Company’s most current reports publicly on file with the Securities and Exchange Commission

which indicated that acquisition of the shares would not cause the person to become the beneficial owner of 20% or more of the voting shares

then outstanding, and (B) the person had no notice or reason to believe that acquisition of the shares would result in the person becoming the

beneficial owner of 20% or more of the voting shares then outstanding, and (iii) the person sells a number of shares that reduces the person’s

beneficial ownership of the voting shares to less than 20% of the voting shares outstanding within 10 business days after receiving notice from

the Company that the 20% threshold had been exceeded.

F.“Performance Measurement Period” means the calendar year 2006, ending December 31, 2006.

G.“Performance Target” means the targeted pre-tax profit income for the Participant’s Primary Performance Group for the calendar year 2006,

as set forth in Exhibit A.

H.“Pre-Tax Profit” means the pre-tax profit income of a performance group, excluding any pre-tax profit income from operations discontinued

in calendar year 2006.

I.“Primary Performance Group” means the internal business segment(s) or group(s) for which the Participant is assigned primary

responsibility, the performance of which will be the basis of the Participant’s award under this Plan. There are three Primary Performance Groups

within the Company: RV Group, Housing Group and Total Company (COA). The applicable Primary Performance Group for the Participant is set

forth in Exhibit A.

J.“Restricted Stock Award” means the grant of restricted Company Stock to Participant subject to the terms of this Agreement.

2.Grant of Award. The Company hereby grants to the Participant 2,000 shares of Company Stock (the "Shares"), subject to the terms and

conditions set forth herein. The Restricted Stock Award will vest as set forth in Section 8.

3.Issuance of Shares. The Shares shall be issued in the Participant’s name, if and to the extent earned, as soon as reasonably practicable after

the conclusion of the audited Performance Measurement Period. Certificates for the Shares shall be held in custody by the Company for the

account of the Participant until the earlier of (i) the Lapse Date, as defined in Section 6 of this Agreement, or (ii) the date on which the Shares

have been forfeited on or before the Lapse Date as provided in Section 6 of this Agreement.

4.Rights of Participant. Subject to the restrictions and risks of forfeiture set forth in this Agreement, once the Shares are earned by the

Participant, but before the vesting of those Shares, the Participant shall be entitled to all rights of a stockholder of the Company with respect to

the Shares, including the right to vote the Shares and, subject to Sections 7 and 8 of this Agreement, the right to receive dividends and/or other

distributions, if any, declared on such Shares from time to time. Dividends on Shares earned but not vested and delivered to Participant shall be

paid into an interest-bearing account and held by the Company, and shall be subject to the general creditors of the Company, until paid to the

Participant upon vesting and delivery of the certificates for the Shares pursuant to which the dividends were paid. Dividends and interest paid

pursuant to Shares which are forfeited will be retained by the Company.

5.Transfer Restrictions. Until the Lapse Date, the Shares, the right to receive the undelivered Shares, and the right to vote such Shares or

receive dividends on such Shares, shall not be sold, exchanged, assigned, pledged, bequeathed, devised, or otherwise transferred, directly or

indirectly, voluntarily or involuntarily, by the Participant, or any person or entity claiming through or on behalf of the Participant, and no Shares

may be subject in any manner to attachment, lien, execution, transfer by bankruptcy, judicial order or by operation of law, garnishment or other

alienation or encumbrance of any kind, either direct or indirect, voluntarily or involuntarily before the Lapse Date; provided, however, that,

subject to the terms of this Agreement, such Shares may be transferred upon the death of the Participant to the legal representative of the estate

of the Participant or the person or persons who shall acquire the right to receive the vested Shares by bequest or inheritance or by reason of the

death of the Participant to the extent earned, upon each Lapse Date. Any transfer or purported transfer of Shares in violation of the restrictions

set forth in this Section 5 shall be null and void and shall result in the forfeiture to the Company, without notice and without consideration to the

Participant, of the Shares transferred or purportedly transferred, as well as any dividends or distributions paid on such Shares.

6.Release of Restrictions. The restrictions set forth in Section 4 shall lapse upon the earlier of the following (the “Lapse Date”): (i) as and

when the shares vest under Section 8 below (subject to completion of the final accounting and audit of the Company’s financial statements for

the Performance Measurement Period), or (ii) the occurrence of a Change in Control.

7.Forfeitures. The Shares shall be forfeited without notice and without consideration immediately in accordance with the following:

A.if the Pre-Tax Profits of the Participant’s Primary Performance Group are not sufficient to earn any portion of the Restricted Stock Award,

pursuant to Section 8 below; or

B.if the Participant’s employment with the Company is terminated during the Performance Measurement Period for any reason other than

death or disability, unless the Committee, in its discretion, determines otherwise; or

C.if the Participant attempts to transfer or transfers the Shares in any manner in violation of Section 4; or

D.if the Participant is demoted during the Performance Measurement Period, including, without limitation, in terms of title, position or duties,

such that the Participant is no longer an Executive or Senior Manager of the Company, as determined by the Committee in its discretion; or

E.if, at any time during the Performance Measurement Period, the Participant is not in compliance with the Company’s Code of Conduct

and/or Participant’s Business Protection Agreement, as determined by the Committee in its discretion; or

F.with respect to any Shares that are not vested pursuant to Section 8 of this Agreement.

Any Shares forfeited under this Section 7 shall be returned to the Company. Any dividends previously paid with respect to any forfeited Shares

shall also be forfeited and retained by the Company with the Shares so forfeited.

8. Vesting of Shares.

A. Shares not earned shall be forfeited and shall not vest, subject to Sections 9 and 11 below. Subject to Section 9 below: if the Pre-Tax Profit

of the Primary Performance Group identified on the attached Exhibit A meets or exceeds the Performance Target set forth on Exhibit A, one

hundred percent (100%) of the Shares are earned; if said Pre-Tax Profit is less than the Performance Target set forth on Exhibit A, but is equal to

or greater than seventy five percent (75%) of said Performance Target, seventy five percent (75%) of the Shares are earned; and, if said Pre-Tax

Profit is less than seventy five percent (75%) of the Performance Target set forth on Exhibit A, but is equal to or greater than fifty percent (50%)

of said Performance Target, fifty percent (50%) of the Shares are earned. If the said Pre-Tax Profit is less than fifty percent (50%) of the

Performance Target set forth on Exhibit A, no Shares are earned. The Pre-Tax Profit shall be conclusively determined according to the Company’s

audited financial statements for the Performance Period.

B. The restrictions set forth in Section 5 on the earned Shares shall lapse and certificates for such Shares held for the Participant shall vest and

be distributed to the Participant as described in this Section 8B or in Section 11. One third (1/3) of the earned Restricted Stock Award shall vest

immediately as of January 1, 2007 (subject to final audit of the Company’s financial records); one third (1/3) shall vest on January 1, 2008 and one

third (1/3) shall vest on January 1, 2009; unless there earlier occurs a Change in Control, in which case Section 11 shall control. A certificate for

one third (1/3) of the number of Shares vested shall be delivered to the Participant within thirty (30) days after the filing of the Company’s Form

10-K with the Securities and Exchange Commission for the Performance Measurement Period. Certificates for the remaining Shares shall be

delivered as soon as practicable after the shares vest on January 1 of 2008 and 2009, respectively, or upon a Change in Control, whichever

occurs first.

9. Termination of Employment Upon Death or Disability.If the Performance Target is achieved in an amount sufficient to earn all or a portion of

an Award, and if the Participant’s employment is terminated during the Performance Measurement Period by reason of the Participant’s death or

disability, the number of shares earned under this Restricted Stock Award will be prorated based on the date of death or disability and the

number of months the Participant was actively employed during the Performance Measurement Period. The Restricted Stock Award, as so

prorated, shall be determined in accordance with Section 8 as of the first day of the year following the end of the Performance Measurement

Period. The unvested Shares shall be issued and delivered to the Participant within thirty (30) days after the filing of the Company’s Form 10-K

with the Securities and Exchange Commission in 2008.

10. Code Section 162(m) Limitation. Notwithstanding anything in this Agreement to the contrary, to the extent that Code Section 162(m) would

operate to limit the Company’s federal income tax deduction for remuneration with respect to a Participant, resulting in federal income tax liability

to the Company, the Participant’s receipt of Shares shall be deferred until Section 162(m) no longer operates to result in such federal income tax

liability to the Company. The determination of whether Code Section 162(m) operates to limit the Company’s deduction in a manner resulting in

federal income tax liability to the Company will be determined by the Committee. Payment of the Shares shall occur in the following calendar year

(or, if necessary, each subsequent calendar year) to the extent such payment, when added to other remuneration subject to the Section 162(m)

limit for such year, does not result in federal income tax liability to the Company. Shares deferred hereunder shall be fully vested and shall not be

forfeited for any reason, including, without limitation, termination of employment.

11. Change in Control. Notwithstanding anything in this Agreement to the contrary, if a Change in Control occurs during the Performance

Measurement Period, the Primary Performance Group will be presumptively and conclusively deemed to have achieved at least 50% of the

Performance Target set forth on Exhibit A, and 50% of the Shares will be deemed to have been earned; provided however, if the percentage

calculated by multiplying the average monthly Pre-Tax Profits earned by the Primary Performance Group per month during the current calendar

year through the last preceding complete calendar month prior to the Change in Control by twelve (12), and dividing that result by the

Performance Target, is greater than 50%, Participant will instead be presumptively and conclusively deemed to have earned the that same

corresponding percentage of the Shares granted by the Restricted Stock Award. All such shares deemed to be earned pursuant to this

paragraph will vest immediately. Certificates for all vested Shares shall be immediately delivered to the Participant upon a Change in Control,

regardless of whether the Participant continues to be employed by the Company or any successor to the Company.

12. Section 83(b) Election. The Participant may make an election in accordance with Section 83(b) of the Internal Revenue Code of 1986, as

amended, within 30 days of the grant of the Shares, even though the Shares will not vest, if at all, until the Lapse Date. Such election must be

filed by the Participant with the Internal Revenue Service Center where the Participant files his or her federal income tax return and attach a copy

of the election to his or her income tax return for the year the Restricted Stock Award is made. If such election is made, the Participant will incur

ordinary income tax on the fair market value of the Shares on the date of the grant, even though the Participant’s rights to the Shares do not vest

until the Lapse Date, and, under current law, subsequent appreciation in the value of the stock will be taxed to the Participant when the

Participant sells the Shares at capital gains tax rates. A sample Section 83(b) election is attached to this Agreement as Appendix A. If the

Participant declines to make the Section 83(b) election, the Participant will incur ordinary income tax on the fair market value of the Shares on

each Lapse Date, provided the Shares have not been forfeited before the Lapse Date, and, under current law, any subsequent gain or loss when

the Participant sells the Shares will be taxed to the Participant at capital gains tax rates. If the Participant decides to make a Section 83(b)

election, it is irrevocable and the Participant will not be able to take a deduction if the Restricted Stock Award does not vest or the Shares

are subsequently forfeited or the value of the Shares declines.

The Company shall have the right to require the Participant to pay the Company the amount of any taxes which the Company is or will be

required to withhold with respect to such Shares before the certificates for such Shares are delivered to the Participant in accordance with this

Agreement; provided, however, that the Participant may elect to meet the tax withholding requirement by requesting the Company to withhold

from the Restricted Stock Award the appropriate number of Shares, rounded up to the next whole number, which would result in proceeds equal

to the minimum statutory withholding tax liability. The Participant may make such election by completing an election form in the form attached to

this Agreement as Appendix B and delivering it to the Company on or before the date on which certificates for the Shares are delivered to the

Participant. If the amount of any required tax withholding is not paid in cash or by the Participant’s election to withhold shares from the

Restricted Stock Award, the Company may elect to deduct such taxes from any other amounts then payable in cash or in Shares or from any

other amounts payable any time thereafter to the Participant or take such other action it deems appropriate, including voiding the Restricted

Stock Award. The Company shall not deliver certificates for any Shares subject to the Restricted Stock Award until the tax withholding

obligation is satisfied as provided in this Section 11.

13. Condition. This Restricted Stock Award is expressly conditioned upon the cancellation of all Restricted Stock Award Agreements previously

entered into with Participant for the three (3) year performance measurement periods (as defined in such agreements) ending on December 31,

2006 and December 31, 2007. Participant accepts this condition by his signature on this Agreement, and such previously entered into Restricted

Stock Award Agreements are hereby cancelled, null, void and of no effect, including in the event of a Change in Control.

14. Provisions of the Plan. All of the provisions of the Plan pursuant to which this Agreement is made are hereby incorporated by reference and

made a part hereof as if specifically set forth herein, and to the extent of any conflict between this Agreement and the terms in the aforesaid Plan,

the Plan shall control. To the extent any capitalized terms are not otherwise defined herein, they shall have the meaning set forth in the Plan.

15. Adjustments Upon changes in Capitalization. In the event of changes in all of the outstanding Company Stock by reason of stock dividends,

stock splits, reclassifications, recapitalizations, mergers, consolidations, combinations or exchanges of shares, reorganizations or liquidations or

similar event, the number and class of Shares subject to a Restricted Stock Award shall be equitably adjusted by the Committee. Any such

adjustment may provide for the elimination of any fractional shares which might otherwise become subject to a Restricted Stock Award.

16. Parties in Interest; Section Headings. This Agreement shall inure to the benefit of the Company, its successors and assigns, and shall be

binding on the Participant and the Participant’s heirs, personal representatives, successors and assigns. The Company may assign its rights

under this Agreement. The Participant may not assign his/her rights hereunder. The section headings contained in this Agreement are inserted

as a matter of convenience and shall not be considered in interpreting or construing this Agreement.

17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana.

18. Entire Agreement; Waiver. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and

supersede all prior agreements, written and oral, between the parties hereto with respect to the subject matter hereof. The waiver of a breach of

any term or condition of this Agreement must be in writing signed by the party sought to be charged with such waiver, and such waiver shall

not be deemed to constitute the waiver of any other breach of the same or of any other term or condition of this Agreement. The invalidity or

unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the remaining provisions.

19. Amendment. This Agreement may be amended only by a writing signed by each of the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

COACHMEN INDUSTRIES, INC.

By_______________________________

Claire C. Skinner

Title:       Chairman, CEO & President     

"PARTICIPANT"

_________________________________

Appendix A

ELECTION UNDER SECTION 83(b) OF

THE INTERNAL REVENUE CODE OF

1986, AS AMENDED (the "Code")

     Pursuant to Section 83(b) of the Code and Treasury Regulation §1.83-2 the undersigned hereby makes the election described in Section 83 (b)

of the Code and states as follows:

The name, address and taxpayer identification number of the taxpayer is

___________________________________________________________________________________________________________.

The property with respect to which the election is made is: ___ shares of Common Stock of Coachmen Industries, Inc.

The date or dates on which the property was transferred is ________, 2005 and the taxable year for which such election was made is

December 31, 2005.

The nature of the restriction or restrictions to which the property is subject is as follows: Shares are restricted and may not be transferred or sold

until three years from the date of grant and then vest only upon satisfaction of certain performance criteria.

The fair market value at the time of transfer (determined without regard to any lapse restriction, as defined in Treasury Regulation §1.83-3(i)) of

each property with respect to which the election is being made is $ .

The amount paid for such property is $0.00.

Copies of this election statement have been furnished to other persons as required by Treasury Regulation §1.83-2(d).

____________________________________

(Signature)

Dated: ______________, 2005

Appendix B

Election To Withhold Shares From Restricted Stock Award

to Satisfy Withholding Obligations

The undersigned Participant in the Coachmen Industries, Inc. Performance Based Restricted Stock Plan has received a Restricted Stock Award under the Plan as evidenced by the Restricted Stock Award Agreement dated _________, 200_ by and between the undersigned and Coachmen Industries, Inc. (the “Company”).

The undersigned hereby requests the Company to withhold from the Restricted Stock Award the appropriate number of shares of Common Stock, rounded up to the nearest whole share, which would result in proceeds equal to all applicable tax withholding requirements with respect to such Restricted Stock Award. The appropriate number of shares to be withheld shall be determined based on the closing sales price of the Common Stock on the NYSE Composite Transactions Tape, as reported in the Wall Street Journal, Midwest Edition, on the first trading day following the Lapse Date . The under signed understands that the election made herein is irrevocable.

____________________________

Signature of Participant

Name: _______________________

Date: ________________________

EXHIBIT A TO 2006 RESTRICTED STOCK AWARD AGREEMENT

Participant:

Primary Performance Group:

Performance Target (pre-tax income):

The maximum number of restricted shares that each of the Registrant’s executive officers may earn pursuant to Restricted Stock Award Agreements between them and the Registrant are as follows:

Executive Officer’s Name and Title	Maximum Number of Restricted Shares Awarded
Claire C. Skinner Chairman of the Board and Chief Executive Officer	12,000
Michael R. Terlep, Jr. President, Coachmen RV Group, and President, Coachmen Recreational Vehicles Company, LLC	12,000
Richard M. Lavers Executive Vice President, General Counsel, Secretary, Chief Financial Officer and Chief Administrative Officer	12,000

EX-31

Exhibit 31.1

CERTIFICATION

I, Claire C. Skinner, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Coachmen Industries, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a) - 15(e) and 15(d) - 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a) - 15(f) and 15(d) - 15(f), for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 5, 2006
	By:	/s/ Claire C. Skinner
		Claire C. Skinner
		Chairman of the Board and Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Richard M. Lavers, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Coachmen Industries, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a) - 15(e) and 15(d) - 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a) - 15(f) and 15(d) - 15(f), for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 5, 2006
	By:	/s/ Richard M. Lavers
		Richard M. Lavers
		Executive Vice President, General Counsel and Secretary, Chief Financial Officer and Chief Administrative Officer

EX-32

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Coachmen Industries, Inc. (the “Company”) for the quarterly period ended March 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”) I, Claire C. Skinner, Chairman of the Board and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period(s) covered in the Report.

	By:	/s/ Claire C. Skinner
		Claire C. Skinner
		Chairman of the Board and Chief Executive Officer
Date: May 5, 2006

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Coachmen Industries, Inc. (the “Company”) for the quarterly period ended March 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”) I, Richard M. Lavers, Executive Vice President and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period(s) covered in the Report.

	By:	/s/ Richard M. Lavers
		Richard M. Lavers
		Executive Vice President, General Counsel and Secretary, Chief Financial Officer and Chief Administrative Officer
Date: May 5, 2006