Unassociated Document

The trend in the Company’s average product content per RV is an indicator of the Company’s overall market share. Content per RV is also impacted by changes in selling prices for the Company’s products. The Company’s average product content per type of RV, calculated based upon the Company’s net sales of components for the different types of RVs, for the years ended December 31, divided by the industry-wide wholesale shipments of the different types of RVs for the years ended December 31, was as follows:

	2008		2007		Percent Change

Content per Travel Trailer and Fifth Wheel RV	$	1,928	$	1,700		13	%
Content per Motorhome	$	574	$	429		34	%
Content per all RVs	$	1,574	$	1,326		19	%

The above product content per RV for the year ended December 31, 2008 includes historical sales results for acquisitions, under the assumption the acquisitions had been completed at the beginning of that yearly period. Sales of certain RV components have been reclassified between travel trailer and fifth wheel RVs, and motorhomes in prior periods.

According to the RVIA, industry production for the years ended December 31, was as follows:

	2008		2007		Percent Change
Travel Trailer and Fifth Wheel RVs		185,100		261,700		(29	)%
Motorhomes		28,300		55,400		(49	)%
All RVs		237,000		353,400		(33	)%

Operating profit of the RV Segment in 2008 decreased 55 percent to $28.7 million largely due to the decline in sales, which was also a factor in the decrease of 5.0 percentage points in the operating profit margin to 7.8 percent of net sales in 2008 from 12.8 percent of net sales in 2007. The decline in RV Segment operating profit was 25 percent of the decline in net sales, excluding sales price increases, which is higher than we would typically expect, largely due to the impact of increased raw material costs.

The operating profit margin of the RV Segment in 2008 was adversely impacted by:

Higher raw material costs.

Labor inefficiencies due to the sharp drop in sales during the latter part of 2008.

The spreading of fixed manufacturing costs over a smaller sales base.

Higher health insurance costs.

Higher than expected integration costs of the Seating Technology acquisition, and costs incurred for prototype expenses for potential new customer accounts. New customer accounts were gained as a result.

An increase in selling, general and administrative expenses to 12.4 percent of net sales in 2008 from 11.3 percent of net sales in 2007, largely due to an increase in bad debt expense, and higher fuel and delivery costs, as well as the spreading of fixed administrative costs over a smaller sales base. This was partially offset by lower incentive compensation expense as a percent of net sales due to reduced operating profit margins.

Partially offset by:

Implementation of cost-cutting measures.

Lower overtime and warranty costs.

As a result of the significant declines in RV sales during 2008, the Company’s RV Segment, while profitable for the year, was unprofitable in the fourth quarter of 2008. The Company did not have an impairment of the goodwill, other intangible assets or long-lived assets in 2008 related to its RV business. At December 31, 2008, the goodwill and other intangible assets of the RV Segment aggregated $34.9 million and $38.3 million, respectively.

On February 27, 2009, the RVIA published its latest forecast of industry production for 2009, which projects a 43 percent decline in the production of travel trailers and fifth wheel RVs as compared to 2008. In response, the Company expects to further reduce fixed costs, workforce, and production capacity to be more in line with anticipated demand. The Company expects that these steps, in conjunction with reductions in working capital, will enable the Company to generate cash flow in 2009.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, the Company will perform its annual impairment test as of November 30, 2009, and will continue to monitor the need for additional interim impairment tests. The Company expects to continue performing quarterly evaluations of the carrying value of goodwill, other intangible assets and long-lived assets, based upon the Company’s stock price which has traded below its book value in early 2009, and the impact of changing market conditions and the Company’s operating results, which could result in a non-cash impairment charge of these assets in the future.

MH Segment

Net sales of the MH Segment in 2008 decreased 19 percent, or $34 million, from 2007. Excluding $13 million in sales price increases, net sales of the MH Segment declined 27 percent, compared to a 14 percent decrease in industry-wide production of manufactured homes. The organic decrease in sales of the Company’s MH Segment was greater than the manufactured housing industry decline due partly to a reduction in the average size of the homes produced by the manufactured housing industry, which require less of the Company’s products, and partly due to business the Company exited in the latter half of 2007 because of inadequate margins. However, in the latter half of 2008, the Company gained market share in the MH Segment.

MH Segment sales in the 2008 fourth quarter included $3 million of components for homes purchased by the Federal Emergency Management Agency (“FEMA”). The Company expects approximately $2 million of additional FEMA-related sales in the first quarter of 2009.

The trend in the Company’s average product content per manufactured home is an indicator of the Company’s overall market share. Manufactured homes contain one or more “floors” or sections which can be joined to make larger homes. Content per manufactured home and content per floor is also impacted by changes in selling prices for the Company’s products. The Company’s average product content per manufactured home produced by the industry and total manufactured home floors produced by the industry, calculated based upon the Company’s net sales of components for manufactured homes for the years ended December 31, divided by the number of manufactured homes and manufactured home floors produced by the industry, respectively, for the years ended December 31, was as follows:

	2008		2007		Percent Change
Content per Home Produced	$	1,652	$	1,754		(6	)%
Content per Floor Produced	$	1,000	$	1,026		(3	)%

According to the IBTS, industry production for the years ended December 31, was as follows:

	2008		2007		Percent Change
Total Homes Produced		81,900		95,800		(14	)%
Total Floors Produced		135,300		163,700		(17	)%

Operating profit of the MH Segment in 2008 decreased 27 percent to $11.0 million largely due to the impact of the decrease in net sales, which was also a factor in the decline in the operating profit margin to 7.7 percent of net sales in 2008, compared to 8.5 percent of net sales in 2007.

The operating profit margin of the MH Segment in 2008 was adversely impacted by:

The spreading of fixed manufacturing costs over a smaller sales base.

Higher health insurance costs.

An increase in selling, general and administrative expenses to 16.5 percent of net sales in 2008 from 14.6 percent of net sales in 2007 due to higher fuel and delivery costs as a percent of net sales, as well as the spreading of fixed administrative costs over a smaller sales base.

Partially offset by:

Changes in product mix.

The elimination of certain low margin business exited in the latter half of 2007.

Implementation of cost-cutting measures.

Improved production efficiencies.

The Company has remained profitable in the MH Segment despite the 78 percent decline in manufactured housing industry production since 1998. The Company did not have an impairment of the goodwill, other intangible assets or long-lived assets in 2008 related to its manufactured housing business; however, the Company will continue to monitor these assets for potential impairment, as a continued downturn in this industry or in the profitability of the Company’s operations, could result in a non-cash impairment charge of these assets in the future. At December 31, 2008, the goodwill and other intangible assets of the MH Segment aggregated $9.2 million and $4.5 million, respectively.

Corporate

Corporate expenses for 2008 decreased $0.4 million compared to 2007 due primarily to a decrease in incentive-based compensation as a result of lower profits, partly offset by higher professional fees.

Other non-segment items

In February 2004, the Company sold certain intellectual property rights for $4.0 million, consisting of cash of $0.1 million at closing and a note of $3.9 million (the “Note”), payable over five years. The Note was initially recorded net of a reserve of $3.4 million. In each of 2008 and 2007, the Company received payments of $0.8 million including interest, which had been previously fully reserved, and the Company therefore recorded a pre-tax gain in Other Income. The balance of the note was $1.0 million at December 31, 2008, which is fully reserved. The Company did not receive the final scheduled payment in January 2009; however in February 2009, the Company received a payment of $0.1 million, and is currently attempting to collect the balance due.

Other non-segment items include the following (in thousands):

	Year Ended
	December 31,
	2008			2007
Cost of sales:
Other	$	-		$	(236	)
Selling, general and administrative expenses:
Legal proceedings		2,109			1,616
Gain on sold facilities		(3,523	)		(2,253	)
Loss on sold facilities and write-downs to estimated current market value of facilities to be sold		1,602			2,231
Incentive compensation impact of other non-segment items		(96	)		(178	)
Goodwill impairment (before the direct effect on incentive compensation)		5,487			-
Executive retirement		2,667			-
Other (income) from the collection of the previously reserved Note		(675	)		(707	)
	$	7,571		$	473

Effective in the third quarter of 2008, gains or losses on sold manufacturing facilities and charges for write-downs to estimated current market value of manufacturing facilities to be sold have been reclassified from cost of goods sold to selling, general, and administrative expenses in the Consolidated Statements of Income. Prior periods have been reclassified to conform to this presentation.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Consolidated Highlights

Net sales for 2007 decreased $61 million (8 percent) from 2006. The decrease in net sales was due to an organic sales decline of $106 million (15 percent) resulting from declines in both the RV and manufactured housing industries, partially offset by sales of $18 million resulting from acquisitions, and sales price increases of approximately $28 million, primarily to offset material cost increases. The organic sales decline was due primarily to a 10 percent decline in industry-wide wholesale shipments of travel trailers and fifth wheel RVs in 2007, as well as an 18 percent decline in industry-wide wholesale production of manufactured homes.

Despite the sales decline, net income for 2007 increased 28 percent from 2006 for the following reasons:

In response to the slowdowns in both the RV and manufactured housing industries, since late 2006, the Company closed 18 facilities and consolidated those operations into other existing facilities, and reduced fixed overhead where prudent, including reducing staff levels by more than 120 salaried employees. These facility consolidations and fixed overhead reductions increased operating profit in 2007 by approximately $6.1 million ($3.8 million after taxes).

Improved production and procurement efficiencies.

Increased profit margins on certain of the Company’s newer product lines, particularly in the axle product line, which had been underperforming.

2006 operating profit was reduced by $3.2 million ($2.0 million after taxes) due to losses at the Indiana specialty trailer operation which was closed in September 2006.

Lower workers compensation costs which improved operating profit by approximately $2.2 million ($1.4 million after taxes).

The impact of 3 acquisitions completed in 2007 and the incremental impact of 2 acquisitions completed in 2006.

A reduction in interest expense of $2.0 million ($1.2 million after taxes) due primarily to a decrease in average debt levels.

These favorable factors were partially offset by:

The negative impact on 2007 of spreading fixed manufacturing and administrative costs over a smaller sales base.

An increase in amortization expense of $1.6 million ($1.0 million after taxes) due to acquisitions.

On July 6, 2007, Lippert acquired certain assets and liabilities, and the business of Extreme Engineering, Inc. (“Extreme Engineering”), a manufacturer of specialty trailers for high-end boats, along with its affiliate, Pivit Hitch, Inc. (“Pivit Hitch”). Extreme Engineering and Pivit Hitch had combined annual sales of $12 million prior to the acquisition. The purchase price for the two companies was $10.8 million, including transaction costs, which was financed from available cash. In 2008, this business was impacted by prolonged declines in industry shipments of small and medium-sized boats that worsened late in 2008, and as a result, the Company recorded an impairment of the entire goodwill associated with this acquisition. The Company has taken significant steps to improve the results of its specialty trailer business in 2008, including consolidating this operation into one facility shared with other product lines.

On May 21, 2007, Lippert acquired certain assets and liabilities, and the business of Coach Step, a manufacturer of patented electric steps for motorhomes. Coach Step had annual sales of $2 million prior to the acquisition. The purchase price was $3.0 million, which was financed from available cash. Upon acquisition, the Company integrated Coach Step’s business into existing Lippert facilities.

On January 2, 2007, Lippert acquired Trailair, Inc. (“Trailair”) and certain assets and liabilities, and the business of Equa-Flex, Inc. (“Equa-Flex”), two affiliated companies, which manufacture several patented products, including innovative suspension systems used primarily for towable RVs. Trailair and Equa-Flex had combined annual sales of $3 million prior to the acquisition. The minimum aggregate purchase price was $5.7 million, of which $3.5 million was paid at closing and the balance is being paid annually over the five years subsequent to the acquisition. The aggregate purchase price could increase to a maximum of $8.3 million if certain sales targets for these products are achieved by Lippert over the five years subsequent to the acquisition. In 2007 and 2008, additional purchase price of less than $0.1 million has been paid. The acquisition was financed with borrowings under the Company’s line of credit. Upon acquisition, the Company integrated Trailair and Equa-Flex’s business into existing Lippert facilities.

RV Segment

Net sales of the RV Segment in 2007 decreased 3 percent, or $17 million, as compared to 2006 due to:

An organic sales decline of approximately $24 million, or 5 percent, of RV related products. The 5 percent organic sales decline in the Company’s RV related products was lower than the 8 percent decrease in industry-wide wholesale shipments of travel trailers and fifth wheel RVs (excluding an estimated 9,000 units purchased by dealers in early 2006 related to the 2005 Gulf Coast hurricanes), primarily because the Company introduced new products and gained market share.

A decline of approximately $17 million in sales related to the 2005 Gulf Coast hurricanes compared to 2006. Subsequent to March 2006, there was no significant hurricane-related business.

A decline of approximately $10 million in sales of specialty trailers primarily due to the September 2006 closure of the Indiana specialty trailer operation and a decline in the West Coast marine industry.

Partially offset by:

Sales resulting from 2007 and 2006 acquisitions aggregating approximately $18 million.

Sales price increases of approximately $16 million, primarily to offset material cost increases.

	2007		2006		Percent Change

Content per Travel Trailer and Fifth Wheel RV	$	1,700	$	1,555		9	%
Content per Motorhome	$	429	$	336		28	%
Content per all RVs	$	1,326	$	1,212		9	%

Sales of certain RV components have been reclassified between travel trailer and fifth wheel RVs, and motorhomes in prior periods.

According to the RVIA, industry production for the years ended December 31, was as follows:

	2007		2006		Percent Change

Travel Trailer and Fifth Wheel RVs		261,700		292,400		(10	)%
Motorhomes		55,400		55,900		(1	)%
All RVs		353,400		390,500		(10	)%

Despite the $17 million decline in net sales, operating profit of the RV Segment in 2007 increased 45 percent to $63.1 million due to an increase in the operating profit margin to 12.8 percent of net sales in 2007, compared to 8.6 percent of net sales in 2006, partially offset by the impact of the decline in sales.

The operating profit margin of the RV Segment in 2007 was favorably impacted by:

Implementation of cost-cutting measures.

Improved production efficiencies and global sourcing.

Increased profit margins on certain of the Company’s newer product lines, particularly in the axle product line, which had been underperforming.

The elimination of $3.3 million in segment operating losses incurred in the Company’s Indiana specialty trailer operation in 2006. This operation was closed in September 2006.

Lower workers compensation costs.

A decrease in selling, general and administrative expenses to 11.3 percent of net sales in 2007 from 11.7 percent of net sales in 2006, largely due to cost cutting measures implemented and lower delivery costs.

Partially offset by:

The negative impact on 2007 of spreading fixed manufacturing and administrative costs over a smaller sales base.

Higher warranty costs, based on claims experience, an industry-wide increase in the number of months between production and the retail sale of RVs, and an increase in the portion of the Company’s products that are more complex.

MH Segment

Net sales of the MH Segment in 2007 decreased 20 percent, or $44 million, as compared to 2006. Excluding the impact of sales price increases (approximately $11 million) primarily to offset material cost increases, organic sales of the MH Segment decreased approximately $55 million, or 25 percent, compared to an 18 percent decrease in industry-wide production of manufactured homes. The organic decrease in sales of the Company’s MH Segment was greater than the manufactured housing industry decline due partly to a reduction in the average size of the homes produced by the manufactured housing industry, thus requiring less of the Company’s products, and partly due to a small amount of business the Company exited because of inadequate margins.

The trend in the Company’s average product content per manufactured home is an indicator of the Company’s overall market share. Content per manufactured home and content per floor is also impacted by changes in selling prices for the Company’s products. Manufactured homes contain one or more “floors” or sections which can be joined to make larger homes. The Company’s average product content per manufactured home produced by the industry and total manufactured home floors produced by the industry, calculated based upon the Company’s net sales of components for manufactured homes for the years ended December 31, divided by the number of manufactured homes and manufactured home floors produced by the industry, respectively, for the years ended December 31, was as follows:

	2007		2006		Percent Change
Content per Home Produced	$	1,754	$	1,784		(2	)%
Content per Floor Produced	$	1,026	$	1,014		1	%

According to the IBTS, industry production for the years ended December 31, was as follows:

	2007		2006		Percent Change
Total Homes Produced		95,800		117,400		(18	)%
Total Floors Produced		163,700		206,600		(21	)%

Operating profit of the MH Segment in 2007 decreased 25 percent to $15.1 million due to the impact of the decrease in net sales, and a decrease in the operating profit margin to 8.5 percent of net sales in 2007, compared to 9.1 percent of net sales in 2006.

The operating profit margin of the MH Segment in 2007 was negatively impacted by:

The spreading of fixed manufacturing costs over a smaller sales base.

An increase in selling, general and administrative expenses to 14.6 percent of net sales in 2007 from 14.0 percent of net sales in 2006 partly due to higher delivery costs as a percent of net sales and the spreading of fixed costs over a smaller sales base.

Partially offset by:

Implementation of cost-cutting measures.

Improved production and procurement efficiencies.

Corporate

Corporate expenses for 2007 increased $0.5 million compared to 2006 due primarily to an increase in incentive-based compensation as a result of higher profits.

Other non-segment items

In February 2004, the Company sold certain intellectual property rights for $4.0 million, consisting of cash of $0.1 million at closing and a Note of $3.9 million, payable over five years. The Note was initially recorded net of a reserve of $3.4 million. In 2007 and 2006, the Company received payments aggregating $0.8 million and $0.7 million, respectively, including interest, which had been previously fully reserved, and the Company therefore recorded a gain in Other Income.

Other non-segment items include the following (in thousands):

	Year Ended
	December 31,
	2007			2006
Cost of sales:
Other	$	(236	)	$	(457	)
Selling, general and administrative expenses:
Legal proceedings		1,616			(16	)
Gain on sold facilities		(2,253	)		(1,763	)
Loss on sold facilities and write-downs to estimated current market value of facilities to be sold		2,231			889
Due diligence costs for an acquisition which was not completed		-			486
Other		-			114
Incentive compensation impact of other non-segment items		(178	)		204
Other (income) from the collection of the previously reserved Note		(707	)		(638	)
	$	(473	)	$	(1,181	)

Interest Expense, Net

The $1.7 million decrease in interest expense, net, for 2008 as compared to 2007, was primarily due to a decrease in the average debt levels during the last 12 months. In addition, for 2008, the Company earned $0.5 million in interest income.

The $2.0 million decrease in interest expense, net, for 2007 as compared to 2006, was primarily due to a decrease in the average debt levels as a result of strong operating cash flows, which more than offset the $50 million the Company has invested in acquisitions since early 2006. In addition, for 2007, the Company earned $1.0 million in interest income.

On October 18, 2004, the Company entered into a five-year interest rate swap with KeyBank National Association with an initial notional amount of $20.0 million from which it received periodic payments at the 3 month LIBOR rate, and made periodic payments at a fixed rate of 3.35 percent, with settlement and rate reset dates every November 15, February 15, May 15 and August 15. The notional amount of the interest rate swap decreased by $1.0 million on each quarterly reset date beginning February 15, 2005. The fair value of the swap was zero at inception. The Company designated this swap as a cash flow hedge of certain borrowings under the previous line of credit and recognized the effective portion of the change in fair value as part of other comprehensive income, with the ineffective portion, which was insignificant, recognized in earnings. In November 2008, the Company repaid the borrowings under the previous line of credit, terminated this swap, and recorded a charge of less than $0.1 million in interest expense related to the termination of this swap.

On June 13, 2006, the Company entered into a seven-year interest rate swap with HSBC Bank USA, NA with an initial notional amount of $15.0 million from which it received periodic payments at the 3 month LIBOR rate and made periodic payments at a fixed rate of 5.39 percent, with settlement and rate reset dates on the last business day of every March, June, September and December. The notional amount of the interest rate swap decreased by $0.5 million on each quarterly reset date beginning September 29, 2006. The Company designated this swap as a cash flow hedge of Senior Promissory Notes due on June 28, 2013, and recognized the effective portion of the change in fair value as part of other comprehensive income, with the ineffective portion, which was insignificant, recognized in earnings. In December 2007, the Company repaid Senior Promissory Notes due on June 28, 2013, terminated this swap, and recorded a charge of $0.4 million in interest expense related to the termination of this swap.

Provision for Income Taxes

The effective tax rate for 2008 was 38.6 percent, compared to 37.2 percent in 2007. The increase in the effective tax rate for 2008 as compared to 2007 was due primarily to the effect of lower profits on state and federal tax rates, as well as a change in pre-tax income between legal entities and states, and an increase in the Company’s tax reserves.

The effective tax rate for 2007 was 37.2 percent, compared to 38.8 percent in 2006. Compared to 2006, the reduction in the effective tax rate for 2007 was primarily due to the Jobs Creation Act of 2004, which reduced the effective Federal tax rate on manufacturing activities by approximately 1 percent in 2006, and approximately 2 percent in 2007. The effective tax rate for 2007 was also reduced by the impact of tax-free interest income earned by the Company, and changes in deferred state taxes, partially offset by a change in pre-tax income for state tax purposes.

In connection with a tax audit by the Indiana Department of Revenue pertaining to calendar years 1998 to 2000, the Company received an initial examination report asserting, in the aggregate, approximately $1.2 million of proposed tax adjustments, including interest and penalties. After two hearings with the Indiana Department of Revenue, the audit findings were upheld. The Company filed an appeal in December 2006 with the Indiana Tax Court and the matter was scheduled for trial in December 2008. In November 2008, the Company and the Indiana Department of Revenue reached an agreement in principle to settle tax years 1998 to 2000 for $0.6 million, as well as 2001 to 2006 for $4.0 million, subject to final documentation. This amount has been fully reserved, and is expected to be paid in the first half of 2009.

New Accounting Standards

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which establishes a framework for reporting fair value and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007. However, the FASB deferred the effective date of SFAS 157, until fiscal years beginning after November 15, 2008, as it relates to fair value measurement requirements for nonfinancial assets and liabilities that are not remeasured at fair value on a recurring basis. Adoption of the applicable provisions of this standard on January 1, 2009 and 2008, respectively, did not have a material impact on the Company.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. SFAS 141(R) requires assets acquired and liabilities assumed in connection with a business combination to be measured at fair value as of the acquisition date, acquisition related costs incurred prior to the acquisition to be expensed, and contractual contingencies to be recognized at fair value as of the acquisition date. The provisions of SFAS No. 141(R) are effective for fiscal years beginning after December 15, 2008. The adoption of this standard on January 1, 2009 did not have a material impact on the Company.

LIQUIDITY AND CAPITAL RESOURCES

The Statements of Cash Flows reflect the following for the years ended December 31, (in thousands):

	2008			2007			2006
Net cash flows provided by operating activities	$	4,657		$	84,910		$	67,021
Net cash flows used for investing activities	$	(25,492	)	$	(11,641	)	$	(51,925	)
Net cash flows used for financing activities	$	(26,686	)	$	(23,841	)	$	(13,396	)

Cash Flows from Operations

Net cash flows from operating activities in 2008 were $80.3 million less than 2007, primarily as a result of (i) lower net income in 2008 (ii) increased inventories in 2008 due to the Company’s strategic purchase of raw materials in advance of price increases and higher priced raw materials in inventory, and (iii) the timing of payments for inventory purchases. This was partially offset by a decrease in accounts receivable due to the decline in sales. The Company expects to lower inventory in 2009 by $20 million to $30 million through consumption of higher priced inventory on hand, and reduced inventory quantities and purchases.

Depreciation and amortization, which decreased by $0.5 million to $17.1 million in 2008, is expected to aggregate $16 million to $17 million in 2009. In addition, non-cash stock-based compensation was $3.6 million in 2008, and is expected to remain about the same in 2009.

Net cash flows from operating activities in 2007 increased by $17.9 million from 2006, primarily as a result of higher net income and the timing of inventory purchases and payments, partially offset by a smaller reduction in accounts receivable and inventory. In 2007, management continued their concerted effort to reduce inventory on hand which began in the latter half of 2006. The larger decrease in accounts receivable and inventory during 2006 was primarily because of higher working capital at January 1, 2006 due to the unusually high sales levels during the fourth quarter of 2005 and first quarter of 2006 resulting from the sales related to the 2005 Gulf Coast hurricanes.

Cash Flows from Investing Activities

Cash flows used for investing activities of $25.5 million in 2008 included $31.8 million for an acquisition of a business and other investments, which were financed from available cash.

On July 1, 2008, Lippert acquired certain assets and liabilities, and the business of Seating Technology, Inc. and its affiliated companies (“Seating Technology”), a manufacturer of a wide variety of furniture products primarily for towable RVs, including a full line of upholstered furniture, mattresses, decorative pillows, wood-backed valances and quilted soft good products. Seating Technology had annual sales of $40 million in 2007. The purchase price was $28.7 million, which was financed from available cash. Subsequent to the acquisition, Lippert closed two of Seating Technology's five leased facilities in Indiana, and consolidated those operations into existing facilities.

On July 1, 2008, Lippert acquired the patent for “JT's Strong Arm Jack Stabilizer,” and other intellectual properties and assets. The purchase price was $3.1 million, which was financed from available cash. JT's Strong Arm Jack Stabilizer represents a significant advance in the elimination of side-to-side and front-to-back movement of a parked travel trailer or fifth wheel RV.

In addition, cash flows from investing activities included proceeds of $10.5 million received from the sale of seven facilities and other fixed assets in connection with the Company’s consolidation of production operations. At December 31, 2008, the Company had four vacant facilities and vacant land listed for sale, with an aggregate carrying value of $5.9 million. One of the facilities is under contract to be sold in 2009 at its carrying value of $0.4 million. The Company used $4.2 million for capital expenditures in 2008, which was financed with available cash. Capital expenditures for 2009 are expected to be consistent with 2008, and are expected to be funded by cash flows from operations.

Cash flows used for investing activities of $11.6 million in 2007 included $17.3 million for the acquisition of businesses and $8.8 million for capital expenditures, offset by proceeds of $14.5 million received from the sale of fixed assets, in connection with the Company’s consolidation of production operations. Capital expenditures and the acquisitions were financed with borrowings under the Company’s line of credit, cash flow from operations, and proceeds from the sale of fixed assets.

Cash Flows from Financing Activities

Cash flows used for financing activities for 2008 of $26.7 million were primarily due to a net decrease in debt of $18.6 million and $8.3 million for the purchase of treasury stock.

Cash flows used for financing activities for 2007 of $23.8 million included a net decrease in debt of $28.4 million, offset by cash flows provided by the exercise of employee stock options of $4.6 million, which includes the related tax benefits.

At December 31, 2008 and 2007, the Company had $3.8 million and $53.4 million, respectively, of cash invested in U.S. Treasury short-term money market instruments with a current yield of less than 1 percent.

On November 25, 2008, the Company entered into an agreement (the “Credit Agreement”) for a $50.0 million line of credit with JPMorgan Chase Bank, N.A., and Wells Fargo Bank N.A. (collectively, the “Lenders”), to replace the Company’s previous $70.0 million line of credit that was scheduled to expire in June 2009. The maximum borrowings under the Company’s new line of credit can be increased by $20.0 million upon approval of the Lenders. Interest on borrowings under the new line of credit is designated from time to time by the Company as either the Prime Rate, but not less than 2.5 percent, plus additional interest up to 0.8 percent (0 percent at December 31, 2008), or LIBOR plus additional interest ranging from 2.0 percent to 2.8 percent (2.0 percent at December 31, 2008) depending on the Company’s performance and financial condition. The Credit Agreement expires December 1, 2011. At December 31, 2008, the Company had $7.6 million in outstanding letters of credit under the new line of credit, and availability under the Company’s new line of credit was $42.4 million. Such availability, along with available cash and anticipated cash flows from operations is expected to be adequate to finance the Company’s anticipated working capital and capital expenditure requirements.

Simultaneously, the Company entered into a $125.0 million “shelf-loan” facility with Prudential Investment Management, Inc., and its affiliates (“Prudential”), to replace the Company’s previous $60.0 million shelf-loan facility with Prudential, of which $6.0 million is outstanding at December 31, 2008. The new facility provides for Prudential to consider purchasing, at the Company’s request, in one or a series of transactions, Senior Promissory Notes of the Company in the aggregate principal amount of up to $125.0 million, to mature no more than twelve years after the date of original issue of each Note. Prudential has no obligation to purchase the Notes. Interest payable on the Notes will be at rates determined by Prudential within five business days after the Company issues a request to Prudential. The shelf-loan facility expires November 25, 2011.

Both the line of credit pursuant to the Credit Agreement and the shelf-loan facility are subject to a maximum leverage ratio debt covenant which limits the amount of consolidated outstanding indebtedness, as defined, to 2.5 times EBITDA, as defined. At December 31, 2008, the maximum leverage ratio debt covenant limits the remaining availability under these facilities collectively to $117.2 million. If the Company’s EBITDA declines to less than $50 million for the trailing twelve month period, the maximum leverage ratio debt covenant declines to 1.25 times EBITDA.

At December 31, 2008 the Company was in compliance with all of its debt covenants and expects to remain in compliance for the next twelve months. Certain of the Company’s loan agreements contain prepayment penalties.

On November 29, 2007 the Board of Directors authorized the Company to repurchase up to 1 million shares of the Company’s Common Stock, of which 447,400 shares have been repurchased at an average price of $18.58 per share, or $8.3 million in total. The aggregate cost of repurchases during the year was funded from the Company’s available cash. The Company is authorized to purchase shares from time to time in the open market, or privately negotiated transactions or block trades. The number of shares ultimately repurchased, and the timing of the purchases, will depend upon market conditions, share price, and other factors. At present due to the current economic conditions, the Company believes it is prudent to conserve cash, and does not intend to repurchase shares. However, changing conditions may cause the Company to reconsider this position.

Future minimum commitments relating to the Company's contractual obligations at December 31, 2008 are as follows (in thousands):

	Payments due by period
			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years

Total indebtedness	$	8,683	$	5,833	$	2,205	$	220	$	425
Interest on fixed rate indebtedness (a)		304		266		38		-		-
Interest on variable rate indebtedness (b)		126		27		44		32		23
Operating leases		18,238		5,474		8,289		3,816		659
Capital leases		64		44		20		-		-
Employment contracts (c)		10,986		5,147		5,646		193		-
Royalty agreements (d)		2,260		741		999		520		-
Purchase obligations (e)		36,316		30,812		2,454		1,277		1,773
Taxes (f)		4,565		4,565		-		-		-
Total	$	81,542	$	52,909	$	19,695	$	6,058	$	2,880

(a)

The Company has used the contractual payment dates and fixed interest rates to determine the estimated future interest payments on fixed rate indebtedness.

(b)

The Company has used the contractual payment dates and the variable interest rates in effect as of December 31, 2008, to determine the estimated future interest payments for variable rate indebtedness.

(c)

This includes amounts payable under employment contracts and arrangements, retirement and severance agreements, and deferred compensation. These amounts do not include $1.3 million in deferred compensation, as the timing of paying the deferred compensation has not yet been determined as it is based on the participants’ elections.

(d)

In addition to the minimum commitments shown here, a license agreement provides for the Company to pay a royalty of 1 percent of sales of certain slide-out systems for the right to use certain patents related to slide-out systems through the expiration of the patents. Pursuant to this license agreement, royalty payments subsequent to December 31, 2008 through the expiration of the patents can not exceed an aggregate of $4.4 million.

(e)

These contractual obligations are primarily comprised of purchase orders issued in the normal course of business. Also included are several longer term purchase commitments, for which the Company has estimated the expected future obligation based on current prices and usage.

(f)

In November 2008, the Company and the Indiana Department of Revenue reached an agreement in principle to settle tax years 1998 to 2000 for $0.6 million, as well as 2001 to 2006 for $4.0 million, subject to final documentation. This amount has been fully reserved, and is expected to be paid in the first half of 2009. At December 31, 2008, the Company has reserved $2.2 million for additional uncertain tax positions and the related interest and penalties, the amount and timing of which cannot be reasonably estimated, and as such have been excluded from the above table.

The above table also does not include the obligation to make payments of up to $2.6 million if certain sales targets for Equa-Flex products are achieved by Lippert over the five year period subsequent to the January 2007 Equa-Flex acquisition. In 2007 and 2008, less than $0.1 million has been paid under this potential obligation.

These commitments are described more fully in the Notes to Consolidated Financial Statements.

CORPORATE GOVERNANCE

The Company is in compliance with the corporate governance requirements of the Securities and Exchange Commission and the New York Stock Exchange. The Company’s governance documents and committee charters and key practices have been posted to the Company’s website (www.drewindustries.com) and are updated periodically. The website also contains, or provides direct links to, all SEC filings, press releases and investor presentations. The Company has also established a toll-free hotline (877-373-9123) to report complaints about the Company’s accounting, internal controls, auditing matters or other concerns.

CONTINGENCIES

On or about January 3, 2007, an action was commenced in the United States District Court, Central District of California entitled Gonzalez vs. Drew Industries Incorporated, Kinro, Inc., Kinro Texas Limited Partnership d/b/a Better Bath Components; Skyline Corporation, and Skylines Homes, Inc. (Case No. CV06-08233). The case purports to be a class action on behalf of the named plaintiff and all others similarly situated in California. Plaintiff initially alleged, but has not sought certification of, a national class.

On April 1, 2008, the Court issued an order granting Drew’s motion to dismiss for lack of personal jurisdiction, resulting in the dismissal of Drew Industries Incorporated as one of the defendants in the case.

Plaintiff alleges that certain bathtubs manufactured by Kinro Texas Limited Partnership, a subsidiary of Kinro, Inc., and sold under the name “Better Bath” for use in manufactured homes, fail to comply with certain safety standards relating to flame spread established by the United States Department of Housing and Urban Development (“HUD”). Plaintiff alleges, among other things, that sale of these products is in violation of various provisions of the California Consumers Legal Remedies Act (Sec. 1770 et seq.), the Magnuson-Moss Warranty Act (Sec. 2301 et seq.), and the California Song-Beverly Consumer Warranty Act (Sec. 1790 et seq.).

Plaintiff seeks to require defendants to notify members of the class of the allegations in the proceeding and the claims made, to repair or replace the allegedly defective products, to reimburse members of the class for repair, replacement and consequential costs, to cease the sale and distribution of the allegedly defective products, and to pay actual and punitive damages and plaintiff’s attorneys fees.

On January 29, 2008, the Court issued an Order denying certification of a class with plaintiff Gonzalez as the class representative. The Court ruled that plaintiff may not be an appropriate class representative for injunctive relief because her bathtub had been replaced. The Court granted plaintiff leave to amend the complaint to add a different plaintiff.

On March 10, 2008, plaintiff amended her complaint to include an additional plaintiff, Robert Royalty. Plaintiff Royalty states that his bathtub was not tested to determine whether it complies with HUD standards. Rather, his allegations are based on “information and belief”, including the testing of plaintiff Gonzalez’s bathtub and other evidence. Kinro denies plaintiff Royalty’s allegations, and intends to continue its vigorous defense against both plaintiffs’ claims.

On June 25, 2008, plaintiffs filed a renewed motion for class certification. On October 20, 2008, the Court again denied certification of a class, without prejudice, which allowed plaintiffs to file a new motion for certification if plaintiffs are able to satisfy the Court’s concerns over the viability of plaintiffs’ case. Plaintiffs filed a third motion for class certification on December 23, 2008. Defendants’ initial motion seeking summary judgment against plaintiffs’ case, which was withdrawn pending further discovery, was supplemented and refiled on December 23, 2008. A hearing on these motions was held on March 2, 2009, but a decision by the Court has not yet been received.

Defendant Kinro has conducted a comprehensive investigation of the allegations made in connection with the claims, including with respect to the HUD safety standards, prior test results, testing procedures, and the use of labels. In addition, at Kinro’s initiative, independent laboratories conducted multiple tests on materials used by Kinro in the manufacture of bathtubs, the results of which tests indicate that Kinro’s bathtubs are in compliance with HUD regulations.

Based on the foregoing investigation and testing, Kinro believes that plaintiffs may not be able to prove the essential elements of their claims, and defendants intend to vigorously defend against the claims.

Moreover, Kinro believes that, because test results received by Kinro confirm that it is in compliance with HUD safety standards, no remedial action is required or appropriate.

In October 2007, the parties participated in voluntary non-binding mediation in an effort to reach a settlement. Kinro made an offer of settlement consistent with its belief regarding the merits of plaintiffs’ allegations. Although no settlement was reached, the parties have since had intermittent discussions. The outcome of such settlement efforts cannot be predicted.

If plaintiffs’ motion for class certification is granted, and defendants’ motion for summary judgment is denied, and if plaintiffs pursue their claims, protracted litigation could result. Although the outcome of such litigation cannot be predicted, if certain essential findings are ultimately unfavorable to Kinro, the Company could sustain a material liability. The Company’s liability insurer denied coverage on the ground that plaintiffs did not sustain any personal injury or property damage.

In the normal course of business, the Company is subject to proceedings, lawsuits and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, it is management’s opinion that after final disposition, including anticipated insurance recoveries, any monetary liability or financial impact to the Company beyond that provided in the Consolidated Balance Sheet as of December 31, 2008, would not be material to the Company’s financial position or annual results of operations.

CRITICAL ACCOUNTING POLICIES

The Company's Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America which requires that certain estimates and assumptions be made that affect the amounts and disclosures reported in those financial statements and the related accompanying notes. Actual results could differ from these estimates and assumptions. The following critical accounting policies, some of which are impacted significantly by judgments, assumptions and estimates, affect the Company's Consolidated Financial Statements. Management has discussed the development and selection of its critical accounting policies with the Audit Committee of the Company’s Board of Directors and the Audit Committee has reviewed the disclosure presented below relating to the critical accounting policies.

Accounts Receivable

The Company maintains an allowance for doubtful accounts that reduces accounts receivables to amounts that are expected to be collected. In assessing the collectability of its accounts receivable, the Company considers such factors as the current overall economic conditions, industry-specific economic conditions, historical and anticipated customer performance, historical experience with write-offs and the level of past-due amounts. This estimation process is subjective, and to the extent that future actual results differ from original estimates, adjustments to recorded accruals may be necessary.

Inventories

Inventories (finished goods, work in process and raw materials) are stated at the lower of cost, determined on a first-in, first-out basis, or market. Cost is determined based solely on those charges incurred in the acquisition and production of the related inventory (i.e. material, labor and manufacturing overhead costs). The Company estimates an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand and market conditions. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory reserves may be required.

Self-Insurance

The Company is self-insured for certain health and workers' compensation benefits up to certain stop-loss limits. Such costs are accrued based on known claims and an estimate of incurred, but not reported (“IBNR”) claims. IBNR claims are estimated using historical lag information and other data provided by claims administrators. This estimation process is subjective, and to the extent that future actual results differ from original estimates, adjustments to recorded accruals may be necessary.

Warranty

The Company provides warranty terms based upon the type of product that is sold. The Company estimates the warranty accrual based upon various factors, including the Company’s (i) historical warranty experience, (ii) product mix, and (iii) sales patterns. The accounting for warranty accruals requires the Company to make assumptions and judgments, and to the extent that future actual results differ from original estimates, adjustments to recorded accruals may be necessary.

Income Taxes

The Company's tax provision is based on pre-tax income, statutory tax rates and tax planning strategies. Significant management judgment is required in determining the tax provision and in evaluating the Company's tax position. The Company establishes additional provisions for income taxes when, despite the belief that the tax positions are fully supportable, there remain certain tax positions that are likely to be challenged and may or may not be sustained on review by tax authorities. The Company adjusts these tax accruals in light of changing facts and circumstances. The effective tax rate in a given financial statement period may be materially impacted by changes in the expected outcome of tax audits.

The Company's accompanying Consolidated Balance Sheets also include deferred tax assets resulting from deductible temporary differences, which are expected to reduce future taxable income. These assets are based on management's estimate of realizability based upon forecasted taxable income. Realizability of these assets is reassessed at the end of each reporting period based upon the Company's forecast of future taxable income. Failure to achieve forecasted taxable income could affect the ultimate realization of certain deferred tax assets, and may result in the recognition of a valuation reserve. For additional information, see Note 9 of Notes to Consolidated Financial Statements.

Impairment of Long-Lived Assets

The Company periodically evaluates whether events or circumstances have occurred that indicate that long-lived assets may not be recoverable or that the remaining useful life may warrant revision. When such events or circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether the carrying value will be recovered through the expected undiscounted future cash flows resulting from the use of the asset. In the event the sum of the expected undiscounted future cash flows is less than the carrying value of the asset, an impairment loss equal to the excess of the asset's carrying value over its fair value would be recorded. The long-term nature of these assets requires the estimation of their cash inflows and outflows several years into the future. Actual results and events could differ significantly from management estimates.

Impairment of Goodwill and Other Intangible Assets

Goodwill and other intangible assets are evaluated for impairment at the reporting unit level on an annual basis and between annual tests whenever events or circumstances indicate that the carrying value of a reporting unit may exceed its fair value. The Company conducts its required annual impairment test as of November 30th each fiscal year. The impairment test uses a discounted cash flow model to estimate the fair value of a reporting unit. This model requires the use of long-term planning forecasts and assumptions regarding industry-specific economic conditions that are outside the control of the Company. Actual results and events could differ significantly from management estimates.

In accordance with SFAS No. 142, the Company conducted its annual impairment analysis of the goodwill in all reporting units during the fourth quarter of 2008. The fair value of each reporting unit was determined using a discounted cash flow model utilizing observable market data to the extent available, and the Company’s weighted average cost of capital of approximately 13 percent. Based on the analysis, the carrying value of the specialty trailer reporting unit exceeded its fair value, and as a result, the Company recorded an impairment of the entire $5.5 million of goodwill of this reporting unit. This business has been impacted by prolonged declines in industry shipments of small and medium-sized boats that worsened late in 2008. The Company has taken significant steps to improve the results of its specialty trailer business, including consolidating this operation into one facility shared with other product lines.

The estimated fair value of the RV and manufactured housing reporting units exceeded their carrying value in 2008, thus no additional impairment was recorded.

In accordance with SFAS No. 142, the Company will perform its annual impairment test as of November 30, 2009, and will continue to monitor the need for additional interim impairment tests. The Company expects to continue performing quarterly evaluations of the carrying value of goodwill, other intangible assets and long-lived assets, based upon the Company’s stock price which has traded below its book value in early 2009, and the impact of changing market conditions and the Company’s operating results, which could result in a non-cash impairment charge of these assets in the future.

Legal Contingencies

The Company is subject to proceedings, lawsuits and other claims in the normal course of business. Each quarter, the Company formally evaluates pending proceedings, lawsuits and other claims with counsel. These contingencies require the judgment of management in assessing the likelihood of adverse outcomes and the potential range of probable losses. Liabilities for legal matters are accrued for when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based upon current law and existing information. Estimates of contingencies may change in the future due to new developments or changes in legal approach. Actual results and events could differ significantly from management estimates.

Other Estimates

The Company makes a number of other estimates and judgments in the ordinary course of business related to product returns, accounts receivable, notes receivable, lease terminations, asset retirement obligations, post-retirement benefits, stock-based compensation, segment allocations, and contingencies. Establishing reserves for these matters requires management's estimate and judgment with regard to risk and ultimate liability or realization. As a result, these estimates are based on management's current understanding of the underlying facts and circumstances and may also be developed in conjunction with outside advisors, as appropriate. Because of uncertainties related to the ultimate outcome of these issues or the possibilities of changes in the underlying facts and circumstances, additional charges related to these issues could be required in the future.

INFLATION

The prices of key raw materials, consisting primarily of steel, vinyl, aluminum, glass and ABS resin are influenced by demand and other factors specific to these commodities, such as the price of oil, rather than being directly affected by inflationary pressures. Prices of certain commodities have historically been volatile. The Company did not experience any significant increase in its labor costs in 2008 related to inflation.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

The Company is exposed to changes in interest rates primarily as a result of its financing activities.

At December 31, 2008, the Company had $7.7 million of fixed rate debt outstanding. Assuming there is a decrease of 100 basis points in the interest rate for borrowings of a similar nature subsequent to December 31, 2008, which the Company becomes unable to capitalize on in the short-term as a result of the structure of its fixed rate financing, future cash flows would be $0.1 million lower per annum than if the fixed rate financing could be obtained at current market rates.

At December 31, 2008, the Company had $0.9 million of variable rate debt outstanding. Assuming there is an increase of 100 basis points in the interest rate for borrowings under these variable rate loans subsequent to December 31, 2008, and outstanding borrowings of $0.9 million, future cash flows would be reduced by less than $0.1 million per annum.

At December 31, 2008, the Company had $3.8 million of temporary investments in U.S. Treasury short-term money market instruments with a current yield of less than 1 percent. Assuming there is a decrease of 100 basis points in the interest rate for these variable rate investments subsequent to December 31, 2008, and total investments of $3.8 million, future cash flows would be reduced by less than $0.1 million per annum.

If the actual change in interest rates is substantially different than 100 basis points, or the outstanding borrowings change significantly, the net impact of interest rate risk on the Company’s cash flow may be materially different than that disclosed above.

Additional information required by this item is included under the caption “Inflation” in Item 7 of this Report.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Drew Industries Incorporated:

We have audited the accompanying consolidated balance sheets of Drew Industries Incorporated and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2008. We also have audited the Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Drew Industries Incorporated and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for uncertainty in tax positions in 2007 due to the adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes.

/s/ KPMG LLP

Stamford, Connecticut

March 12, 2009

Delaware		13-3250533
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

200 Mamaroneck Avenue, White Plains, NY		10601
(Address of principal executive offices)		(Zip Code)

Title of each class		Name of each exchange on which registered
Common Stock, par value $0.01		New York Stock Exchange

●Towable RV steel chassis	●Aluminum windows and screens
●Towable RV axles and suspension solutions	●Chassis components
●RV slide-out mechanisms and solutions	●Furniture and mattresses
●Thermoformed products	●Entry and baggage doors
●Toy hauler ramp doors	●Entry steps
●Manual, electric and hydraulic stabilizer	●Other towable accessories
and lifting systems	●Specialty trailers for hauling boats, personal
	watercraft, snowmobiles and equipment

City	State	Square Feet
Boaz	Alabama		86,600
Elkhart *	Indiana		42,000
Howe	Indiana		60,000
Phoenix	Arizona		61,000
Middlebury	Indiana	12 acres of land
Arkansas City	Kansas	5 acres of land

(1)	These plants also produce products for manufactured homes. The square footage indicated above represents that portion of the building that is utilized for manufacture of products for RVs.

(2)	At December 31, 2007, the Company’s RV Segment used an aggregate of 1,644,001 square feet for manufacturing and warehousing.

(1)	These plants also produce products for RVs. The square footage indicated above represents that portion of the building that is utilized for manufacture of products for manufactured homes.

(2)	At December 31, 2007, the Company’s MH Segment used an aggregate of 1,197,770 square feet for manufacturing and warehousing.

Name		Position

Fredric M. Zinn (Age 57)		Chief Executive Officer since January 1, 2009, President and Director since May 2008.

Leigh J. Abrams (Age 66)		Chairman of the Board of Directors since January 1, 2009.

Edward W. Rose, III (Age 67)		Lead Director of the Board of Directors since January 1, 2009.

James F. Gero (Age 63)		Director since May 1992.

Frederick B. Hegi, Jr. (Age 65)		Director since May 2002.

David A. Reed (Age 61)		Director since May 2003.

John B. Lowe, Jr. (Age 69)		Director since May 2005.

Jason D. Lippert (Age 36)		Director since May 2007, President and Chief Executive Officer of Lippert Components, Inc. since February 2003, and President and Chief Executive Officer of Kinro, Inc. since January 1, 2009.

Joseph S. Giordano III (Age 39)		Chief Financial Officer since May 2008, Treasurer since May 2003.

Scott T. Mereness (Age 37)		Executive Vice President and Chief Operating Officer of Lippert Components, Inc. since February 2003, Vice President of Kinro, Inc. since January 1, 2009.

	Years Ended December 31,
(In thousands, except per share amounts)	2008		2007		2006		2005		2004

Operating Data:
Net sales	$	510,506	$	668,625	$	729,232	$	669,147	$	530,870
Operating profit	$	19,898	$	65,959	$	55,295	$	57,729	$	43,996
Income before income taxes	$	19,021	$	63,344	$	50,694	$	54,063	$	40,857
Provision for income taxes	$	7,343	$	23,577	$	19,671	$	20,461	$	15,749
Net income	$	11,678	$	39,767	$	31,023	$	33,602	$	25,108

Net income per common share:
Basic	$	0.54	$	1.82	$	1.43	$	1.60	$	1.22
Diluted	$	0.53	$	1.80	$	1.42	$	1.56	$	1.18

Financial Data:
Working capital	$	84,378	$	89,861	$	61,979	$	76,146	$	57,204
Total assets	$	311,358	$	345,737	$	311,276	$	307,428	$	238,053
Long-term obligations	$	9,763	$	23,128	$	47,327	$	64,768	$	61,806
Stockholders’ equity	$	258,878	$	251,536	$	204,888	$	167,709	$	122,044

●Vinyl and aluminum windows and screens	●Steel chassis
●Thermoformed bath and kitchen products	●Steel chassis parts
●Axles

	Wholesale			Retail
Quarter ended March 31, 2008		(8	)%		(16	)%
Quarter ended June 30, 2008		(18	)%		(19	)%
Quarter ended September 30, 2008		(38	)%		(27	)%
Quarter ended December 31, 2008		(63	)%		(36	)%

Year ended December 31, 2008		(29	)%		(23	)%
Year ended December 31, 2007		(10	)%		4	%

	Year Ended December 31,
	2008			2007			2006

Net sales	$	510,506		$	668,625		$	729,232
Cost of sales		403,000			509,875			575,156
Gross profit		107,506			158,750			154,076
Selling, general and administrative expenses		80,129			93,498			99,419
Goodwill impairment		5,487			-			-
Executive retirement		2,667			-			-
Other (income)		(675	)		(707	)		(638	)
Operating profit		19,898			65,959			55,295
Interest expense, net		877			2,615			4,601
Income before income taxes		19,021			63,344			50,694
Provision for income taxes		7,343			23,577			19,671
Net income	$	11,678		$	39,767		$	31,023

Net income per common share:
Basic	$	0.54		$	1.82		$	1.43
Diluted	$	0.53		$	1.80		$	1.42

							Accumulated
							Other						Total
	Common		Paid-in		Retained		Comprehensive			Treasury			Stockholders’
	Stock		Capital		Earnings		Income			Stock			Equity

Balance - December 31, 2005	$	236	$	47,655	$	139,015	$	270		$	(19,467	)	$	167,709
Net income						31,023								31,023
Unrealized loss on interest rate
swaps, net of taxes								(164	)					(164	)
Comprehensive income														30,859
Issuance of 199,940 shares of
common stock pursuant to stock
options and deferred stock units		2		1,769										1,771
Income tax benefit relating to
issuance of common stock
pursuant to stock options				1,568										1,568
Stock-based compensation expense				2,981										2,981
Balance - December 31, 2006		238		53,973		170,038		106			(19,467	)		204,888
Net income						39,767								39,767
Unrealized loss on interest rate
swaps, net of taxes								(68	)					(68	)
Comprehensive income														39,699
Issuance of 249,929 shares of
common stock pursuant to stock
options and deferred stock units		3		2,510										2,513
Income tax benefit relating to
issuance of common stock
pursuant to stock options				1,947										1,947
Stock-based compensation expense				2,489										2,489
Balance - December 31, 2007		241		60,919		209,805		38			(19,467	)		251,536
Net income				11,678										11,678
Unrealized loss on interest rate
swap, net of taxes								(38	)					(38	)
Comprehensive income														11,640
Issuance of 39,080 shares of
common stock pursuant to stock
options and deferred stock units				340										340
Income tax benefit relating to
issuance of common stock
pursuant to stock options				59		59
Stock-based compensation expense				3,636										3,636
Purchase of 447,400 shares of
treasury stock											(8,333	)		(8,333	)
Balance - December 31, 2008	$	241	$	64,954	$	221,483	$	-		$	(27,800	)	$	258,878

●Steel chassis	●Vinyl and aluminum windows and doors
●Axles and suspension solutions	●Chassis components
●RV slide-out mechanisms and solutions	●Furniture and mattresses
●Thermoformed products	●Entry and baggage doors
●Toy hauler ramp doors	●Entry steps
●Manual, electric and hydraulic stabilizer	●Other towable accessories
and lifting systems	●Specialty trailers for hauling boats, personal
	watercraft, snowmobiles and equipment

	2008		2007		2006
Net sales:
RV Segment		72%		74%		70%
MH Segment		28%		26%		30%
Total net sales		100%		100%		100%
Operating profit:
RV Segment		72%		81%		68%
MH Segment		28%		19%		32%
Total segment operating profit		100%		100%		100%

	2008		2007		2006
RV Segment		7.8%		12.8%		8.6%
MH Segment		7.7%		8.5%		9.1%

	Segments						Corporate			Intangible
	RV		MH		Total		and Other			Assets			Total

Year ended December 31, 2008
Revenues from external
customers(a)	$	368,092	$	142,414	$	510,506	$	-		$	-		$	510,506
Operating profit (loss)(b)(e)		28,725		11,016		39,741		(14,788	)		(5,055	)		19,898
Total assets(c)		143,205		47,373		190,578		33,615			87,165			311,358
Expenditures for long-lived
assets(d)		5,488		719		6,207		31			-			6,238
Depreciation and amortization		8,636		3,353		11,989		34			5,055			17,078

Year ended December 31, 2007
Revenues from external
customers(a)	$	491,830	$	176,795	$	668,625	$	-		$	-		$	668,625
Operating profit (loss)(b)(e)		63,132		15,061		78,193		(8,056	)		(4,178	)		65,959
Total assets(c)		140,531		51,969		192,500		80,803			72,434			345,737
Expenditures for long-lived
assets(d)		8,080		1,002		9,082		119			-			9,201
Depreciation and amortization		9,017		4,346		13,363		16			4,178			17,557

Year ended December 31, 2006
Revenues from external
customers(a)	$	508,824	$	220,408	$	729,232	$	-		$	-		$	729,232
Operating profit (loss)(b)(e)		43,623		20,131		63,754		(5,913	)		(2,546	)		55,295
Total assets(c)		149,961		75,468		225,429		26,091			59,756			311,276
Expenditures for long-lived
assets(d)		17,009		6,598		23,607		4			-			23,611
Depreciation and amortization		7,816		5,290		13,106		17			2,546			15,669

Net tangible assets acquired	$	6,693
Customer relationships		9,400
Other identifiable intangible assets		2,575
Goodwill (tax deductible)		9,991
Total cash consideration	$	28,659

Net tangible assets acquired	$	1,238
Identifiable intangible assets		5,600
Goodwill (tax deductible)		3,974
Total cash consideration	$	10,812

Net tangible assets acquired	$	604
Identifiable intangible assets		1,830
Goodwill (tax deductible)		598
Total cash consideration	$	3,032

Net tangible assets acquired	$	625
Identifiable intangible assets		4,160
Goodwill (tax deductible)		267
Goodwill (non tax deductible)		426
Total consideration		5,478
Less present value of future minimum payments		(1,961	)
Total cash consideration	$	3,517

Net tangible assets acquired	$	3,925
Patents		9,600
Other identifiable intangible assets		6,400
Goodwill (tax deductible)		10,338
Total consideration		30,263
Less debt assumed		(732	)
Total cash consideration	$	29,531

Net tangible assets acquired	$	756
Identifiable intangible assets		1,520
Goodwill (tax deductible)		1,888
Total cash consideration	$	4,164

			Accumulated				Estimated Useful
	Gross		Amortization		Net		Life in Years

Non-compete agreements	$	3,231	$	1,130	$	2,101	3 to 7
Customer relationships		24,870		6,225		18,645	8 to 16
Tradenames		6,251		1,846		4,405	5 to 14
Patents		21,183		3,547		17,636	5 to 19
Other intangible assets	$	55,535	$	12,748	$	42,787

	2008		2007
Finished goods	$	10,801	$	12,698
Work in process		2,946		2,975
Raw materials		80,187		60,606
Total	$	93,934	$	76,279

	2008		2007
Accrued employee compensation and benefits	$	13,010	$	20,833
Accrued warranty		4,510		4,360
Accrued expenses and other		14,704		19,475
Total	$	32,224	$	44,668

	2008		2007
Senior Promissory Notes payable at the rate of $1,000 per
quarter on January 29, April 29, July 29 and October 29,
with interest payable quarterly at the rate of 5.01 percent per
annum, final payment to be made on April 29, 2010	$	6,000	$	10,000
Notes payable pursuant to a Credit Agreement, with
interest at prime rate or LIBOR plus a rate margin based
upon the Company's performance (a) (b)		-		8,000
Industrial Revenue Bonds, interest rates at December 31,
2008 of 3.48 percent to 4.68 percent, due 2009 through 2017;
secured by certain real estate and equipment		1,662		5,448
Other loans primarily secured by certain real estate and
equipment, due in 2009, with fixed interest rates of
5.18 percent to 5.28 percent		1,021		3,727
Other loan primarily secured by certain real estate,
with a variable interest rate		-		87
		8,683		27,262
Less current portion		5,833		8,881
Total long-term indebtedness	$	2,850	$	18,381

	2008		2007

Prepaid expenses and other current assets	$	9,436	$	7,171
Other long-term assets		306		118
	$	9,742	$	7,289

	2008		2007
Deferred tax assets:
Employee benefits	$	3,765	$	2,919
Goodwill and other intangible assets		2,741		1,514
Inventories		1,759		1,330
Post retirement		1,474		327
Deferred compensation		1,270		1,452
Accrued insurance		996		1,179
Accounts receivable		758		596
Other		1,812		1,603
Total deferred tax assets		14,575		10,920
Deferred tax liabilities:
Fixed assets		4,833		3,607
Other		-		24
Total deferred tax liabilities		4,833		3,631
Net deferred tax asset	$	9,742	$	7,289

	2008			2007
Balance at beginning of period	$	4,829		$	3,752
Additions for tax positions of prior years		819			373
Additions based on tax positions
related to the current year		363			791
Expiration of statute of limitations		(229	)		(87	)
Balance at end of period	$	5,782		$	4,829

2009	$	5,474
2010		4,482
2011		3,807
2012		2,558
2013		1,258
Thereafter		659
Total minimum lease payments	$	18,238

						Weighted
						Average
	Number of			Stock Option		Exercise
	Option Shares			Exercise Price		Price
Outstanding at December 31, 2005		1,578,460		$	4.55 – $28.71	$	17.78
Granted		45,000		$	26.39		26.39
Exercised		(197,480	)	$	4.55 – $16.16		8.97
Forfeited		(61,900	)	$	4.55 – $28.33		18.15
Outstanding at December 31, 2006		1,364,080		$	4.55 – $28.71		19.33
Granted		586,000		$	28.09 – $32.61		32.32
Exercised		(248,840	)	$	4.55 – $28.71		10.10
Forfeited		(41,600	)	$	12.78 – $28.33		24.84
Outstanding at December 31, 2007		1,659,640		$	7.88 – $32.61		25.16
Granted		515,500		$	11.59 – $14.22		11.92
Exercised		(38,200	)	$	7.88 – $12.78		8.93
Forfeited		(60,600	)	$	12.78 – $32.61		26.18
Outstanding at December 31, 2008		2,076,340		$	11.59 – $32.61	$	22.14
Exercisable at December 31, 2008		932,480		$	12.78 – $32.61	$	21.69

	Option			Option
	Exercise	Shares		Remaining		Shares
	Price	Outstanding		Life (Years)		Exercisable
$	12.78		356,700		0.9		356,700
$	13.80		30,000		1.0		30,000
$	16.15		40,000		2.0		40,000
$	16.16		12,000		1.9		9,000
$	28.33		473,640		2.9		277,080
$	28.71		37,500		3.0		37,500
$	26.39		37,500		4.0		37,500
$	32.61		536,000		4.9		107,200
$	28.09		37,500		5.0		37,500
$	11.59		449,000		5.9		-
$	13.03		4,000		5.9		-
$	14.22		62,500		6.0		-

				Stock Price
	Number of			at Date
	Shares			of Issuance
Outstanding at December 31, 2005		59,506
Issued		9,451		$	25.01 – $37.35
Exercised		(2,460	)	$	13.90 – $29.95
Outstanding at December 31, 2006		66,497		$	6.87 – $37.35
Issued		10,589		$	26.01 – $43.02
Exercised		(1,089	)	$	7.61 – $12.78
Outstanding at December 31, 2007		75,997		$	6.87 – $43.02
Issued		21,995		$	11.59 – $27.40
Exercised		(880	)	$	25.01 – $37.35
Outstanding at December 31, 2008		97,112		$	6.87 – $43.02

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter			Year

Year ended December 31, 2008
Net sales	$	159,148	$	150,523	$	124,274	$	76,561		$	510,506
Gross profit		36,579		36,804		24,982		9,141			107,506
Income (loss) before income taxes		14,895		15,310		4,207		(15,391	)		19,021
Net income (loss)	$	9,105	$	9,190	$	2,593	$	(9,210	)	$	11,678
Net income (loss) per common share:
Basic	$	0.41	$	0.42	$	0.12	$	(0.43	)	$	0.54
Diluted	$	0.41	$	0.42	$	0.12	$	(0.43	)	$	0.53

Stock market price
High	$	28.69	$	26.81	$	20.58	$	16.05		$	28.69
Low	$	21.47	$	15.95	$	14.80	$	9.65		$	9.65
Close (at end of quarter)	$	24.46	$	15.95	$	17.11	$	12.00		$	12.00

Year ended December 31, 2007
Net sales	$	172,944	$	184,456	$	173,410	$	137,815		$	668,625
Gross profit		39,887		46,750		41,456		30,657			158,750
Income before income taxes		15,642		20,344		17,810		9,548			63,344
Net income	$	9,589	$	12,562	$	11,133	$	6,483		$	39,767
Net income per common share:
Basic	$	0.44	$	0.57	$	0.51	$	0.29		$	1.82
Diluted	$	0.44	$	0.57	$	0.50	$	0.29		$	1.80

Stock market price
High	$	30.72	$	35.29	$	41.98	$	44.18		$	44.18
Low	$	24.26	$	28.21	$	32.86	$	26.75		$	24.26
Close (at end of quarter)	$	28.68	$	33.14	$	40.68	$	27.40		$	27.40

/s/ Fredric M. Zinn	/s/ Joseph S. Giordano III
President and	Chief Financial Officer and
Chief Executive Officer	Treasurer