10-Q/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No.1

(Mark One)

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

For the quarterly period ended June 30, 2005

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

Commission file number 001-12085

NATIONAL R.V. HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0371079
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3411 N. Perris Blvd., Perris, California	92571
(Address of principal executive offices)	(Zip Code)

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

Indicate by check 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 o   NO x

Indicate by check mark whether the registrant is an accelerated filer.

YES x   NO o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act 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.

Class	Outstanding at October 10, 2005
Common stock, par value $0.01 per share	10,339,484

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A (“Form 10-Q/A”) amends and restates the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2005, as initially filed with the Securities and Exchange Commission (the “SEC”) on October 26, 2005 (the “Original Form 10-Q”). This Form 10-Q/A is being filed to restate the consolidated statements of operations for the three and six months ended June 30, 2004, to restate the consolidated statement of cash flows for the six months ended June 30, 2004 and to restate the consolidated balance sheets as of June 30, 2005 and as of December 31, 2004 as described under the heading “New Restatement” below and to clarify the presentation of the consolidated financial information for the three and six months ended June 30, 2004 appearing in certain sections of this filing as described under “Clarification of Presentation” below. These restatements have previously been reflected in the Company’s 2004 Form 10-K/A filed on March 21, 2006 and its 2005 Form 10-K filed on March 30, 2006.

New Restatement

The Company is restating the consolidated statements of operations for the three and six months ended June 30, 2004, restating the consolidated statement of cash flows for the six months ended June 30, 2004 and restating the consolidated balance sheets as of June 30, 2005 and as of December 31, 2004 for the correction of accounting for the amortization of certain leasehold improvements. Statement of Financial Accounting Standards (SFAS) No. 13, “Accounting for Leases,” as further clarified by Emerging Issues Task Force (EITF) No. 05-6, “Determining the Amortization Period of Leasehold Improvements,” requires that leasehold improvements by the lessee be amortized over the shorter of their estimated useful lives or the lease term. With respect to one of the Company’s leased properties, the Company amortized certain leasehold improvements over a period that exceeded the lease term. The use of the incorrect amortization period on these leasehold improvements caused a cumulative understatement of leasehold amortization expense of $0.41 million at December 31, 2004. Although this error was not material to any individual prior period, the cumulative adjustment to correct the error would be material to the quarter in which it were to be corrected. Accordingly, the Company has concluded to restate prior periods to correct this error. As a result of this restatement, the restated cost of goods sold, selling and general and administrative combined expense was increased by $0.02 million and $0.03 million for the three and six months ended June 30, 2004, respectively. This restatement is in addition to the prior restatement reflected in the Company’s Original Form 10-Q as described below under “Restatement of Prior Periods Previously Reflected in the Original Form 10-Q.”

Clarification of Presentation

Additionally, the Company is clarifying the presentation of the restatement of the consolidated statements of operations for the three and six months ended June 30, 2004 and the consolidated statement of cash flows for the six months ended June 30, 2004 as disclosed in Note 2 to the Consolidated Financial Statements.

In Note 2 to the Consolidated Financial Statements and in Item 2, the Original Form 10-Q presented the consolidated financial information for the three and six months ended June 30, 2004 under the columns “As Previously Reported” (which represented the originally reported consolidated financial statements adjusted for discontinued operations) followed by “As Restated” (which represented the originally reported consolidated financial statements adjusted for discontinued operations and for the correction of certain errors discussed therein). In order to clarify the presentation of the restated consolidated financial information for the three and six months ended June 30, 2004, the Company is restating the financial tables on pages 10 and 17 of this Form 10-Q/A to present such information “As Originally Reported” (which represents the originally reported consolidated financial statements for such periods), then “As Restated for Correction of Errors” (which restates such financial information for the correction of certain errors), and finally “As Restated for Correction of Errors and Discontinued Operations” (which includes the reclassification of discontinued operations and the restatements for the correction of certain errors).

Changes Reflected in this Form 10-Q/A

As a result of the restatement and clarifications, the disclosures in the following items related to the three and six months ended June 30, 2005 and 2004 and the year ended December 31, 2004 have been revised:

Part I, Item 1 — Consolidated Financial Statements and Notes to Consolidated Financial Statements

·Consolidated Financial Statements

·Note 1 — Basis of Presentation (History of Recent Losses section)

·Note 2 — Restatement of a Prior Period

·Note 7 — Stock-Based Compensation

·Note 8 — Income Taxes

2

·Note 10 — (Loss) Earnings Per Share

Part I, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

·Restatement of Financial Statements

·Executive Overview

·Results of Operations

Part I, Item 4 — Controls and Procedures

Part II, Item 6 — Exhibits

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

Restatement of Prior Periods Previously Reflected in the Original Form 10-Q

As discussed and included in the Original Form 10-Q, in addition to providing financial statements and other required information for the three and six months ended June 30, 2005, this Quarterly Report on Form 10-Q/A also includes restated consolidated statements of operations for the three and six months ended June 30, 2004, as discussed in Note 2 to the Company’s Consolidated Financial Statements. The Company’s previously issued financial statements for this period should not be relied upon.

As discussed and included in the Original Form 10-Q, the Company is restating the consolidated statement of operations for the three and six months ended June 30, 2004 in this Form 10-Q/A for the following item:

·Correction of accounting for dealer sales incentives

3

NATIONAL R.V. HOLDINGS, INC.

INDEX

PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets — June 30, 2005 and December 31, 2004 (Restated)
	Consolidated Statements of Operations Three and Six Months Ended June 30, 2005 and 2004 (Restated)
	Consolidated Statements of Cash Flows Six Months Ended June 30, 2005 and 2004 (Restated)
	Notes to Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures about Market Risk
Item 4.	Controls and Procedures
PART II — OTHER INFORMATION
Item 3.	Defaults Upon Senior Securities
Item 6.	Exhibits
	Signature

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PART I, ITEM 1
Consolidated Financial Statements

NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

	June 30, 2005		December 31, 2004
	(Restated)		(Restated)
ASSETS
Current assets:
Cash and cash equivalents	$	187	$	11
Restricted cash	25		251
Receivables, less allowance for doubtful accounts of $210 and $137, respectively	24,201		19,976
Inventories	81,891		74,826
Deferred income taxes	1,086		1,291
Note receivable	484		2,213
Prepaid expenses	1,847		2,924
Total current assets	109,721		101,492
Property, plant and equipment, net	38,472		37,403
Other assets	1,301		1,338
	$	149,494	$	140,233
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	30,063	$	16,612
Accrued expenses	26,451		22,242
Line of credit	12,218		12,690
Book overdraft	—		803
Current portion of capital leases	51		51
Total current liabilities	68,783		52,398
Long-term accrued expenses	6,902		7,069
Deferred income taxes	1,086		1,291
Long-term portion of capital leases	171		185
Total liabilities	76,942		60,943
Commitments and contingent liabilities (Note 6)
Stockholders’ equity:
Preferred stock - $0.01 par value; 5,000 shares authorized, 4,000 issued and outstanding	—		—
Common stock - $0.01 par value; 25,000,000 shares authorized, 10,339,484 and 10,302,109 issued and outstanding, respectively	103		103
Additional paid-in capital	37,563		37,423
Retained earnings	34,886		41,764
Total stockholders’ equity	72,552		79,290
	$	149,494	$	140,233

The accompanying notes are an integral part of the consolidated financial statements.

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NATIONAL R.V. HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2005			2004		2005			2004
				(Restated)					(Restated)
Net sales	$	123,225		$	119,282	$	248,850		$	222,428
Cost of goods sold	121,124			109,692		241,134			205,755
Gross profit	2,101			9,590		7,716			16,673
Selling expenses	3,315			2,587		6,954			5,295
General and administrative expenses	3,891			3,145		7,143			5,581
Operating (loss) income	(5,105		)	3,858		(6,381		)	5,797
Interest expense	311			16		588			78
Other expense (income)	18			1		(91		)	(47		)
(Loss) income from continuing operations before income taxes	(5,434		)	3,841		(6,878		)	5,766
Provision for income taxes	—			1,502		—			2,218
(Loss) income from continuing operations	(5,434		)	2,339		(6,878		)	3,548
Income (loss) from discontinued operations	—			249		—			(623		)
Income taxes related to discontinued operations	—			111		—			(213		)
Income (loss) from discontinued operations, net of taxes	—			138		—			(410		)
Net (loss) income	$	(5,434	)	$	2,477	(6,878		)	3,138
Basic (loss) earnings per common share:
Continuing operations	$	(0.53	)	$	0.23	$	(0.67	)	$	0.35
Discontinued operations	—			0.01		—			(0.04		)
Total	$	(0.53	)	$	0.24	$	(0.67	)	$	0.31
Diluted (loss) earnings per common share:
Continuing operations	$	(0.53	)	$	0.23	$	(0.67	)	$	0.34
Discontinued operations	—			0.01		—			(0.04		)
Total	$	(0.53	)	$	0.24	$	(0.67	)	$	0.30
Weighted average number of shares:
Basic	10,339			10,197		10,337			10,194
Diluted	10,339			10,440		10,337			10,377

The accompanying notes are an integral part of the consolidated financial statements.

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NATIONAL R.V. HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended June 30,
	2005			2004
				(Restated)
Cash flows from operating activities
Net (loss) income	$	(6,878	)	$	3,138
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	1,811			1,963
Bad debt expense (recovery)	93			(16		)
Provision for excess and obsolete inventories	1,635			1,179
Gain on asset disposal	(23		)	(45		)
Deferred income taxes	—			(10		)
Changes in assets and liabilities:
Decrease in restricted cash	226			—
Increase in receivables	(4,018		)	(10,178		)
Increase in inventories	(8,700		)	(13,379		)
Decrease (increase) in prepaid expenses	1,077			(335		)
Increase in accounts payable	13,451			13,030
Increase in accrued expenses	4,042			3,273
Net cash provided by (used in) operating activities	2,716			(1,380		)
Cash flows from investing activities
Decrease in other assets	37			21
Repayments on note receivable	1,429			—
Proceeds from sale of assets	32			1,932
Purchase of property, plant and equipment	(2,889		)	(2,351		)
Net cash used in investing activities	(1,391		)	(398		)
Cash flows from financing activities
Net payments on line of credit	(472		)	—
Decrease in book overdraft	(803		)	—
Principal payments on capital leases	(14		)	—
Principal payments on long-term debt	—			(12		)
Proceeds from issuance of common stock	140			94
Net cash (used in) provided by financing activities	(1,149		)	82
Net increase (decrease) in cash and cash equivalents	176			(1,696		)
Cash and cash equivalents, beginning of the year	11			2,059
Cash and cash equivalents, end of period	$	187		$	363

The accompanying notes are an integral part of the consolidated financial statements.

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NATIONAL R.V. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 — BASIS OF PRESENTATION

General

The consolidated financial statements include the financial statements of National RV Holdings, Inc. (the “Company”) and its wholly- owned subsidiaries National RV, Inc. (“National RV”) and Country Coach, Inc. (“Country Coach”). As further discussed in Note 9, the operating results of the Travel Trailer division have been reclassified as a discontinued operation for the prior periods.

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

In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary, consisting of normal recurring adjustments, to state fairly the financial position, the results of operations and cash flows for all periods presented, including the elimination of significant intercompany accounts in consolidation. In addition to the restatement adjustments discussed in Note 2, certain reclassifications have been made to prior period amounts to conform to current period presentation.

Seasonal Nature of Business Activities

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

Use of Accounting Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses for each period. On an on-going basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

History of Recent Losses

The Company experienced a net loss in the first six months of 2005 of $6.9 million compared to a net income of $3.1 million during the same period last year. The Company provided cash from operating activities in the first six months of 2005 of $2.7 million compared to a use of cash of $1.4 million for the same period last year.

The Company has incurred net losses of $9.5 million and $8.5 million for the years ended December 31, 2004 and 2003, respectively. The Company has used cash from operating activities of $15.8 million for the year ended December 31, 2004 and provided cash from operating activities of $8.4 million for the year ended December 31, 2003. The RV industry has been historically cyclical and subject to downturns during periods of weak economic conditions. With rising fuel prices and continued economic uncertainty, the Company experienced a further decline in demand for its products in 2005. These conditions led the Company to assess its short-term liquidity needs and plans to achieve profitability.

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

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In order to fund on-going operations in the short-term, the Company remains dependent upon its ability to utilize outside financing through borrowings on its line of credit until it achieves sustained operational profitability through a combination of increased sales, cost reductions and improved product margins. After consideration of the restrictions of the borrowing capacity noted in Note 5, the Company believes it has sufficient financial resources to fund its operations in the short-term. However, the Company’s ability to meet its obligations in the long-term is dependent on its ability to generate positive cash flows from operations and is dependent on continued borrowings under its line of credit. If management is unable to achieve its operational profitability plan or unforeseen events occur and its existing line of credit is insufficient to allow the Company to meet its obligations, the Company may need to implement alternative plans that could include long-term financing collateralized by real estate (which is presently unencumbered) or obtaining additional debt financing, additional reductions in operating costs, deferral of capital expenditures, and further reductions in working capital. While the Company believes that it could successfully complete the alternative plans, if necessary, there can be no assurance that such alternatives would be available on acceptable terms and conditions or that the Company would be successful in its implementation of such plans.

NOTE 2 — RESTATEMENT OF A PRIOR PERIOD

The consolidated financial statements have been restated to correct an error related to the amortization of leasehold improvements. Emerging Issues Task Force (EITF) No. 05-6, “Determining the Amortization Period of Leasehold Improvements” requires that leasehold improvements by the lessee be amortized over the shorter of their estimated useful lives or the lease term. With respect to one of the Company’s leased properties, the Company amortized certain leasehold improvements over a period that exceeded the lease term. The use of the incorrect amortization period on these leasehold improvements caused a cumulative understatement of leasehold amortization expense of $0.41 million at December 31, 2004. As a result of this restatement, the restated cost of goods sold, selling and general and administrative combined expense was increased by $0.02 million and $0.03 million for the three and six months ended June 30, 2004, respectively. Also, as a result of this restatement, both the basic and diluted net earnings per share amounts were unchanged.

In addition, the consolidated financial statements for the three and six months ended June 30, 2004 previously reflected the restatement of certain dealer sales incentives, which include rebates and floorplan interest reimbursement paid to dealers to promote the sale of the product and retail incentives paid directly to dealer retail salespersons to promote the sale of the product and the return of sale and warranty information. The consolidated statements of operations for the three and six months ended June 30, 2004 have been restated to reclassify these sales incentives from selling expenses to a reduction of revenue, as required by EITF No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (including a Reseller) of the Vendor’s Products.” As a result of this restatement, both the restated net sales and the restated selling expenses were reduced by $0.46 million and $1.15 million for the three and six months ended June 30, 2004, respectively. Also, as a result of this restatement, both the basic and diluted net earnings per share amounts were unchanged.

The following table presents the effect of changes in the consolidated statements of operations caused by the restatement (in thousands):

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Statements of Operations

	Three Months Ended June 30, 2004						Six Months Ended June 30, 2004
	As Originally Reported		As Restated  for Correction of Errors		As Restated for Correction of Errors and Discontinued Operations		As Originally Reported		As Restated  for Correction of Errors		As Restated for Correction of Errors and Discontinued Operations
Net sales	$	126,408	$	125,941	$	119,282	$	236,846	$	235,694	$	222,428
Cost of goods sold	$	115,738	$	115,752	$	109,692	$	218,889	$	218,914	$	205,755
Gross profit	$	10,670	$	10,189	$	9,590	$	17,957	$	16,780	$	16,673
Selling expenses	$	3,262	$	2,796	$	2,587	$	6,883	$	5,732	$	5,295
General and administrative expenses	$	3,286	$	3,287	$	3,145	$	5,873	$	5,875	$	5,581
Operating income	$	4,122	$	4,106	$	3,858	$	5,201	$	5,173	$	5,797
Income from continuing operations before income taxes	$	4,105	$	4,089	$	3,841	$	5,170	$	5,142	$	5,766
Provision for income taxes	$	1,618	$	1,612	$	1,502	$	2,014	$	2,004	$	2,218
Income from continuing operations	$	2,487	$	2,477	$	2,339	$	3,156	$	3,138	$	3,548
Income (loss) from discontinued operations	$	—	$	—	$	249	$	—	$	—	$	(623	)
Income taxes related to discontinued operations	$	—	$	—	$	111	$	—	$	—	$	(213	)
Income (loss) from discontinued operations, net of taxes	$	—	$	—	$	138	$	—	$	—	$	(410	)
Net income	$	2,487	$	2,477	$	2,477	$	3,156	$	3,138	$	3,138
Basic (loss) earnings per common share:
Continuing operations	$	0.24	$	0.24	$	0.23	$	0.31	$	0.31	$	0.35
Discontinued operations	—		—		0.01		—		—		(0.04		)
Total	$	0.24	$	0.24	$	0.24	$	0.31	$	0.31	$	0.31
Diluted (loss) earnings per common share:
Continuing operations	$	0.24	$	0.24	$	0.23	$	0.30	$	0.30	$	0.34
Discontinued operations	—		—		0.01		—		—		(0.04		)
Total	$	0.24	$	0.24	$	0.24	$	0.30	$	0.30	$	0.30

Statement of Cash Flows

	Six Months Ended June 30, 2004
	As Originally Reported			As Restated for Correction of Errors			As Restated for Correction of Errors and Discontinued Operations
Net income	$	3,156		$	3,138		$	3,138
Depreciation and amortization	$	1,935		$	1,963		$	1,963
Bad debt recovery	$	—		$	(16	)	$	(16	)
Provision for excess and obsolete inventories	$	—		$	1,179		$	1,179
Deferred income taxes	$	—		$	(10	)	$	(10	)
Increase in receivables	$	(10,194	)	$	(10,178	)	$	(10,178	)
Increase in inventories	$	(12,200	)	$	(13,379	)	$	(13,379	)

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Balance Sheets

	June 30, 2005				December 31, 2004
	As Originally Reported		As Restated for Correction of Errors		As Originally Reported		As Restated for Correction of Errors
Deferred income taxes	$	1,089	$	1,086	$	1,294	$	1,291
Total current assets	$	109,724	$	109,721	$	101,495	$	101,492
Property, plant and equipment, net	$	38,878	$	38,472	$	37,809	$	37,403
Total assets	$	149,903	$	149,494	$	140,642	$	140,233
Deferred income taxes (long-term liabilities)	$	1,089	$	1,086	$	1,294	$	1,291
Total liabilities	$	76,945	$	76,942	$	60,946	$	60,943
Retained earnings	$	35,292	$	34,886	$	42,170	$	41,764
Total stockholders’ equity	$	72,958	$	72,552	$	79,696	$	79,290
Total liabilities and stockholders’ equity	$	149,903	$	149,494	$	140,642	$	140,233

NOTE 3 — RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

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

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123R), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” (SFAS No. 123) and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first annual period after June 15, 2005, with early adoption encouraged. The pro forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition. The Company is required to adopt SFAS No. 123R in the first calendar quarter of 2006, beginning January 1, 2006. Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include modified prospective and modified retrospective adoption options. Under the modified retrospective option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The modified prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the modified retrospective method would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. The Company is evaluating the requirements of SFAS No. 123R. The Company has not yet determined the method of adoption or the effect of adopting SFAS No. 123R, and the Company has not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS No. 123.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB No. 20 and FAS No. 3” (SFAS No. 154). SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS No. 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. The correction of an error in previously issued financial statements is not an accounting change. However, the reporting of an error correction involves adjustments to previously issued financial statements similar to those generally applicable to reporting an accounting change retrospectively. Therefore, the reporting of a

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correction of an error by restating previously issued financial statements is also addressed by SFAS No. 154. SFAS No. 154 is required to be adopted in fiscal years beginning after December 15, 2005. The Company does not believe that adoption of this standard will have an impact on its consolidated financial statements.

NOTE 4 — SUPPLEMENTAL BALANCE SHEET INFORMATION

Inventories consist of the following (in thousands):

	June 30, 2005		December 31, 2004
Finished goods	$	13,997	$	16,379
Work-in-process	40,540		35,388
Raw materials	20,073		18,398
Chassis	7,281		4,661
Total inventories	$	81,891	$	74,826

Accrued expenses consist of the following (in thousands):

	June 30, 2005		December 31, 2004
Current accrued expenses:
Workers’ compensation self-insurance reserve	$	3,032	$	2,720
Warranty reserve	9,775		8,330
Payroll and other accrued expenses	13,644		11,192
Total current accrued expenses	$	26,451	$	22,242
Long-term accrued expenses:
Workers’ compensation self-insurance reserve	$	6,083	$	6,151
Warranty reserve	142		175
Deferred compensation	677		743
Total long-term accrued expenses	$	6,902	$	7,069

NOTE 5 — CREDIT FACILITY

At June 30, 2005, the Company had an asset-based revolving credit facility of $20 million with UPSC (UPS Capital Corporation), which was scheduled to expire in August 2005. At June 30, 2005 and December 31, 2004, the Company had outstanding loans under the line of credit totaling $12.2 million and $12.7 million, respectively. At June 30, 2005, the Company was in default with the covenant requiring delivery of the Company’s annual financial statements within a required period of time and on that date the Company received an extension letter from UPSC waiving the default on the Company’s required delivery date of its annual financial statements and extending the required delivery date of the annual financial statements to August 31, 2005 (which date was extended to December 15, 2005 as part of the execution of the new credit facility discussed below). At June 30, 2005, the interest rate on the outstanding borrowings under the line of credit was 7.00%. The weighted average interest rate for the borrowings under the line of credit during the six-month period ended June 30, 2005 and 2004 was 6.47% and 4.80%, respectively.

On August 12, 2005, the original facility was replaced by a new three-year asset-based revolving credit facility with UPSC and Wells Fargo Bank for $25 million, with the Company having the option, subject to certain conditions, of increasing the revolver in $5 million increments up to a total credit facility of $40 million. On September 29, 2005, the Company effected such an increase in the amount of the credit facility from $25 million to $30 million. The new credit facility is collateralized by all of the Company’s assets other than real estate. Borrowing availability is based on eligible accounts receivable and inventory. The facility also includes a requirement to maintain a blocked account arrangement, whereby remittances from the Company’s customers reduce the debt outstanding. The new credit facility contains, among other provisions, certain financial covenants, including funded debt to Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA), and a fixed charge coverage ratio. If these financial covenants are not met, the Company’s availability under the credit facility will be reduced. The Company did not meet these financial covenants as of June 30, 2005, and currently does not expect to until September 30, 2006. Until these covenants are met, the Company’s average borrowings availability under its $40 million facility is limited to an amount between $27 to $32 million, depending on eligible inventory and accounts receivable. Initial amounts borrowed under the revolving credit facility bear interest at the prime rate listed in the Wall Street Journal plus 0.50 percentage points and may be subsequently adjusted down based on a trailing twelve month funded debt to EBITDA calculation.

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NOTE 6 — COMMITMENTS AND CONTINGENCIES

Most of the Company’s motorhome sales are made on terms requiring payment within 15 business days or less of the dealer’s receipt of the unit. Most dealers finance all, or substantially all, of the purchase price of their inventory under floor plan arrangements with banks or finance companies under which the lender pays the Company directly. Dealers typically are not required to commence loan repayments to such lenders for a period of at least six months. The loan is collateralized by a lien on the motorhome. Consistent with industry practice, the Company has entered into repurchase agreements with these lenders. In general, the repurchase agreements require the Company to repurchase a unit if the dealer defaults on the financed unit. Upon a dealer default, the agreements generally require the Company to repurchase RVs at the election of the lender provided certain conditions are met, such as repossession of the RV by the lender, the RV being new and unused and the time elapsed between invoice date and demand for repurchase being no longer than a specified period which is typically 18 months or less. The Company’s maximum potential exposure under these agreements approximated $177 million at June 30, 2005. As with receivables, the risk of loss under the repurchase agreements was spread over a number of dealers and lenders and was reduced by the resale value of the RVs, which the Company would be required to repurchase. Losses under these agreements have not been material in the past and management does not believe that any future losses under such agreements will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

The Company is involved in legal proceedings in the ordinary course of business, including a variety of warranty, “lemon law” and product liability claims typical in the recreation vehicle industry. With respect to product liability claims, the Company’s insurance policies cover, in whole or in part, defense costs and liability costs for personal injury or property damage (excluding damage to Company motorhomes). While it is not possible to estimate with certainty the ultimate legal and financial liability with respect to this litigation, management is of the opinion that while the final resolution of any such litigation may have an impact on the Company’s consolidated results for a particular reporting period, the ultimate disposition of such litigation will not have any material adverse effect on the Company’s financial position, results of operations or liquidity.

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

Six Months Ended June 30, 2005 (in thousands)

	Beginning Balance		Additions		Deductions		Ending Balance
Warranty reserve	$	8,505	$	9,792	$	8,380	$	9,917

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

NOTE 7 — STOCK-BASED COMPENSATION

The Company has stock option plans that enable it to offer equity participation to employees, officers and directors as well as certain non-employees. Stock options may be granted as incentive or nonqualified options. The Company has four fixed option plans that reserve shares of common stock for issuance to executives, key employees, consultants, and directors. The Company has also issued fixed options outside of such plans pursuant to individual stock option agreements. Options granted to non-employee directors generally vest immediately upon grant and expire five to ten years from the date of grant. Options granted to employees, including employee directors, generally vest in three equal annual installments and expire five to ten years from the date of grant. The price of the options granted pursuant to these plans will not be less than 100 percent of the market value of the shares on the date of grant. There were no options granted for the three-month and six-month periods ended June 30, 2005. There were 24,000 options granted during the three-month period and 260,500 options granted during the six-month period ended June 30, 2004.

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

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2005			2004		2005			2004
				(Restated)					(Restated)
(Loss) income from continuing operations	$	(5,434	)	$	2,339	$	(6,878	)	$	3,548
Income (loss) from discontinued operations, net of taxes	—			138		—			(410		)
Net (loss) income - as reported	(5,434		)	2,477		(6,878		)	3,138
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	147			170		341			289
Pro forma net (loss) income	$	(5,581	)	$	2,307	$	(7,219	)	$	2,849
Basic (loss) earnings per share as reported:
Continuing operations	$	(0.53	)	$	0.23	$	(0.67	)	$	0.35
Discontinued operations	—			0.01		—			(0.04		)
Total basic (loss) earnings per share	(0.53		)	0.24		(0.67		)	0.31
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	0.01			0.01		0.03			0.03
Basic earnings (loss) per share pro forma	$	(0.54	)	$	0.23	$	(0.70	)	$	0.28
Diluted (loss) earnings per share as reported:
Continuing operations	$	(0.53	)	$	0.23	$	(0.67	)	$	0.34
Discontinued operations	—			0.01		—			(0.04		)
Total diluted (loss) earnings per share	(0.53		)	0.24		(0.67		)	0.30
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	0.01			0.02		0.03			0.03
Diluted earnings (loss) per share pro forma	$	(0.54	)	$	0.22	$	(0.70	)	$	0.27

The weighted-average fair value of the stock options has been estimated on the date of grant using the Black-Scholes option-pricing model. There were no new stock option grants during the six-month period ended June 30, 2005. The assumptions used to calculate weighted-average fair value are listed below for new grants during the three-month period ended June 30, 2004.

	June 30, 2004
Dividend yield	0.0	%
Expected volatility	41.0	%
Risk-free interest rate	3.45	%
Expected lives	4.0 years

NOTE 8 — INCOME TAXES

As of June 30, 2005, the Company has a current deferred tax asset of $1.1 million and a long-term deferred tax liability of $1.1 million. During the three and six-month periods ended June 30, 2005, the Company recorded a non-cash charge of $1.8 million and $2.4 million, respectively, to increase the valuation allowance to offset the change in net deferred tax assets. As a result, the valuation allowance for deferred tax assets increased from $11.2 million at December 31, 2004 to $13.6 million at June 30, 2005. Recent cumulative losses, the downturn in current market conditions and its impact on near term earnings led the Company to conclude that it was more likely than not that all or a portion of the net deferred tax asset will not be realized. The Company expects to record a full valuation allowance on future tax benefits until it can sustain an appropriate level of profitability and until such time, the Company would not expect to recognize any significant tax benefits in its future results of operations.

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NOTE 9 — DISCONTINUED OPERATIONS

On September 24, 2004, the Company sold its Travel Trailer business assets to Weekend Warrior, a privately owned, California-based ramp-trailer manufacturer. The sale was designed to allow the Company to further concentrate its efforts and resources on its growing motorhome business. The total selling price of the business was $3.2 million. The sale included inventory totaling $2.8 million and equipment totaling $0.1 million. In addition, the Company recognized a $0.3 million gain on the sale. Weekend Warrior paid $0.5 million at closing with the balance to be paid in ten equal monthly payments. Furthermore, a payment of 1% of monthly sales for other assets and trademarks will be made on a monthly basis over a twelve-month period ending October 10, 2005 with a minimum due of $0.3 million which has been included in note receivable in the accompanying consolidated balance sheets. The Company also entered into a sublease agreement, which allows Weekend Warrior to lease a portion of the Company’s facilities for up to twelve months. Net sales from discontinued operations were $6.7 million and $13.3 million for the three and six months ended June 30, 2004.

NOTE 10 — (LOSS) EARNINGS PER SHARE

Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding for the period. Diluted (loss) earnings per share reflect the potential dilution that could occur if options were exercised or converted into common stock. Shares attributable to the exercise of outstanding options that are anti-dilutive are excluded from the calculation of diluted loss per share for the three and six months ended June 30, 2005.

All amounts in thousands except per share amounts.

	Three Months Ended June 30,					Six Months Ended June 30,
	2005			2004		2005			2004
				(Restated)					(Restated)
(Loss) income from continuing operations	$	(5,434	)	$	2,339	$	(6,878	)	$	3,548
Income (loss) from discontinued operations, net of taxes	—			138		—			(410		)
Net (loss) income	$	(5,434	)	$	2,477	$	(6,878	)	$	3,138
Basic weighted average common shares outstanding	10,339			10,197		10,337			10,194
Effect of dilutive stock options	—			243		—			183
Diluted weighted average common shares outstanding	10,339			10,440		10,337			10,377
Basic (loss) earnings per share:
Continuing operations	$	(0.53	)	$	0.23	$	(0.67	)	$	0.35
Discontinued operations	—			0.01		—			(0.04		)
Total	$	(0.53	)	$	0.24	$	(0.67	)	$	0.31
Diluted (loss) earnings per share:
Continuing operations	$	(0.53	)	$	0.23	$	(0.67	)	$	0.34
Discontinued operations	—			0.01		—			(0.04		)
Total	$	(0.53	)	$	0.24	$	(0.67	)	$	0.30

For the three months ended June 30, 2005 and 2004, excluded from the computation of diluted earnings per share were stock options to purchase 911,844 shares and 12,000 shares, respectively. For the six months ended June 30, 2005 and 2004, excluded from the computation of diluted earnings per share were stock options to purchase 911,844 shares and 227,000 shares, respectively.

NOTE 11 — SUBSEQUENT EVENTS

As more fully discussed in Note 5, the Company executed a new three-year asset-based revolving credit facility on August 12, 2005 with UPSC and Wells Fargo Bank for $25 million, with the Company having the option, subject to certain conditions, of increasing the revolver in $5 million increments up to a total credit facility of $40 million. On September 29, 2005, the Company effected such an increase in the amount of the credit facility from $25 million to $30 million.

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NATIONAL R.V. HOLDINGS, INC.
PART I, ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Disclosure Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q/A contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results may differ materially from that projected or suggested herein due to certain risks and uncertainties including, without limitation, potential fluctuations in the Company’s operating results; any material weaknesses in the Company’s internal control over financial reporting or the failure to remediate any of the previously disclosed material weaknesses; any failure to implement required new or improved controls; resumption of losses; seasonality and economic conditions; dependence on certain dealers and concentration of dealers in certain regions; dependence on chassis suppliers; potential liabilities under repurchase agreements; competition; government regulation; warranty claims; and product liability claims. Certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested are set forth in the Form 10-K, in the Company’s filings with the Securities and Exchange Commission (the “SEC”) and the Company’s public announcements, copies of which are available from the SEC or from the Company upon request. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Restatement of Financial Statements

The following discussion and analysis gives effect to the restatement described in Note 2 to the unaudited consolidated financial statements for the periods ended June 30, 2005, December 31, 2004 and June 30, 2004 contained herein. Accordingly, certain of the data set forth in this section is not comparable to discussions and data in our previously filed annual and quarterly reports for corresponding periods.

The following table presents the effect of changes in the consolidated statements of operations caused by the restatement (in thousands):

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Statements of Operations

	Three Months Ended June 30, 2004						Six Months Ended June 30, 2004
	As Originally Reported		As Restated  for Correction of Errors		As Restated for Correction of Errors and Discontinued Operations		As Originally Reported		As Restated  for Correction of Errors		As Restated for Correction of Errors and Discontinued Operations
Net sales	$	126,408	$	125,941	$	119,282	$	236,846	$	235,694	$	222,428
Cost of goods sold	$	115,738	$	115,752	$	109,692	$	218,889	$	218,914	$	205,755
Gross profit	$	10,670	$	10,189	$	9,590	$	17,957	$	16,780	$	16,673
Selling expenses	$	3,262	$	2,796	$	2,587	$	6,883	$	5,732	$	5,295
General and administrative expenses	$	3,286	$	3,287	$	3,145	$	5,873	$	5,875	$	5,581
Operating income	$	4,122	$	4,106	$	3,858	$	5,201	$	5,173	$	5,797
Income from continuing operations before income taxes	$	4,105	$	4,089	$	3,841	$	5,170	$	5,142	$	5,766
Provision for income taxes	$	1,618	$	1,612	$	1,502	$	2,014	$	2,004	$	2,218
Income from continuing operations	$	2,487	$	2,477	$	2,339	$	3,156	$	3,138	$	3,548
Income (loss) from discontinued operations	$	—	$	—	$	249	$	—	$	—	$	(623	)
Income taxes related to discontinued operations	$	—	$	—	$	111	$	—	$	—	$	(213	)
Income (loss) from discontinued operations, net of taxes	$	—	$	—	$	138	$	—	$	—	$	(410	)
Net income	$	2,487	$	2,477	$	2,477	$	3,156	$	3,138	$	3,138
Basic (loss) earnings per common share:
Continuing operations	$	0.24	$	0.24	$	0.23	$	0.31	$	0.31	$	0.35
Discontinued operations	—		—		0.01		—		—		(0.04		)
Total	$	0.24	$	0.24	$	0.24	$	0.31	$	0.31	$	0.31
Diluted (loss) earnings per common share:
Continuing operations	$	0.24	$	0.24	$	0.23	$	0.30	$	0.30	$	0.34
Discontinued operations	—		—		0.01		—		—		(0.04		)
Total	$	0.24	$	0.24	$	0.24	$	0.30	$	0.30	$	0.30

Statement of Cash Flows

	Six Months Ended June 30, 2004
	As Originally Reported			As Restated for Correction of Errors			As Restated for Correction of Errors and Discontinued Operations
Net income	$	3,156		$	3,138		$	3,138
Depreciation and amortization	$	1,935		$	1,963		$	1,963
Bad debt recovery	$	—		$	(16	)	$	(16	)
Provision for excess and obsolete inventories	$	—		$	1,179		$	1,179
Deferred income taxes	$	—		$	(10	)	$	(10	)
Increase in receivables	$	(10,194	)	$	(10,178	)	$	(10,178	)
Increase in inventories	$	(12,200	)	$	(13,379	)	$	(13,379	)

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Balance Sheets

	June 30, 2005				December 31, 2004
	As Originally Reported		As Restated for Correction of Errors		As Originally Reported		As Restated for Correction of Errors
Deferred income taxes	$	1,089	$	1,086	$	1,294	$	1,291
Total current assets	$	109,724	$	109,721	$	101,495	$	101,492
Property, plant and equipment, net	$	38,878	$	38,472	$	37,809	$	37,403
Total assets	$	149,903	$	149,494	$	140,642	$	140,233
Deferred income taxes (long-term liabilities)	$	1,089	$	1,086	$	1,294	$	1,291
Total liabilities	$	76,945	$	76,942	$	60,946	$	60,943
Retained earnings	$	35,292	$	34,886	$	42,170	$	41,764
Total stockholders’ equity	$	72,958	$	72,552	$	79,696	$	79,290
Total liabilities and stockholders’ equity	$	149,903	$	149,494	$	140,642	$	140,233

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgements, assumptions and estimates that affect the amounts reported. See the discussion of critical accounting policies in our Annual Report on Form 10-K/A for the year ended December 31, 2004. For the quarter ended June 30, 2005, there were no unusual uncertainties of a material nature involved in the application of these principles nor any unusual, material variation in estimates related to these principles.

Executive Overview

National R.V. Holdings, Inc. (“the Company”) operates in one business segment that designs, manufactures, and markets motorhomes through its wholly owned subsidiaries, National R.V., Inc. (NRV) and Country Coach, Inc. (CCI). The RVs are marketed primarily in the United States of America by NRV under the Dolphin, Islander, Sea Breeze, Tradewinds and Tropi-Cal brand names and by CCI under brand names including Affinity, Allure, Inspire, Intrigue, Magna and Prevost by Country Coach.

The following table sets forth for the periods indicated the percentage of net sales represented by certain items reflected in the Company’s Consolidated Statements of Operations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
			(Restated)				(Restated)
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	98.3		92.0		96.9		92.5
Gross profit	1.7		8.0		3.1		7.5
Selling expenses	2.7		2.2		2.8		2.4
General and administrative expenses	3.1		2.6		2.9		2.5
Operating (loss) income	(4.1	)	3.2		(2.6	)	2.6
Interest expense	0.3		0.0		0.2		0.0
Other expense (income)	0.0		0.0		(0.0	)	(0.0	)
(Loss) income from continuing operations before income taxes	(4.4	)	3.2		(2.8	)	2.6
Provision for income taxes	0.0		1.2		0.0		1.0
(Loss) income from continuing operations	(4.4	)	2.0		(2.8	)	1.6
(Income) loss from discontinued operations	0.0		(0.2	)	0.0		0.3
Income taxes related to discontinued operations	0.0		0.1		0.0		(0.1	)
Income (loss) from discontinued operations, net of taxes	0.0		0.1		0.0		(0.2	)
Net (loss) income	(4.4	)%	2.1	%	(2.8	)%	1.4	%

During the second quarter of 2005, the Company incurred a loss of $5.4 million compared to income of $2.3 million from continuing operations for the same quarter last year. The second quarter of 2005 loss per diluted share was $0.53 compared to earnings per diluted share from continuing operations of $0.23 for the second quarter of 2004. The loss from continuing operations for the first six months ended June 30, 2005 was $6.9 million, or $0.67 per diluted share, as compared to income of $3.5 million from continuing operations, or $0.34 per diluted share, for the first six months ended June 30, 2004.

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Looking Forward

Many of the same objectives the Company addressed last year remain in place for the current year, including aggressive product development, improved productivity and cost control, and increasing its dealer body.

During the second quarter of 2005, the Company rolled out its remaining 2006 model-year products.

Improved productivity and cost control remain significant objectives. The Company is making a significant investment this year in manufacturing engineers at its Country Coach facilities in an effort to increase productivity. Controlling costs also remains a high priority, specifically in the manufacturing cost areas, warranty, and workers’ compensation. The Company continues to focus on improving the quality of its motorhomes to increase consumer satisfaction and decrease future warranty costs. Also, the Company has instituted a number of safety programs, which have resulted in measurably reduced workers’ compensation costs. The Company expects further progress in containing its costs as it continues to implement lean manufacturing concepts.

A continued focus on dealer acquisition and enhanced training programs for the Company’s workforce, service centers, dealers, and consumers are also key initiatives. The Company has undertaken efforts in the areas of safety; with new distance learning capabilities, the Company is looking forward to broadcasting its service training programs directly to dealers and service providers, driving the movement for increased customer satisfaction in areas of technical maintenance. In addition, factory-training programs are providing the Company’s customers a basis for self-diagnostics and a better understanding of the equipment they are operating.

The Recreational Vehicle Industry Association’s (RVIA) market expansion campaign, GO RVing, now in its eighth year, is fostering greater awareness and garnering media attention. Though RVIA expects substantial growth for the industry in the long-term or decade ahead, RVIA expects a decline in the industry in the near term or each of the years 2005 and 2006.

Results of Operations

Comparison of Continuing Operations for the Three and Six Months Ended June 30, 2005 to the Three and Six Months Ended June 30, 2004:

(Amounts in tables are in thousands, except percentages)

Net sales

	Three Months Ended June 30, Percent Change								Six Months Ended June 30, Percent Change
	2005					2004			2005					2004
						(Restated)								(Restated)
Net sales	$	123,225		3.3	%	$	119,282		$	248,850		11.9	%	$	222,428
as a percent of net sales	100.0		%			100.0		%	100.0		%			100.0		%

Net sales of $123.2 million for the three-month period ended June 30, 2005 increased $3.9 million or 3.3% from the same three-month period ended June 30, 2004. Wholesale unit shipments of diesel motorhomes for the three-month period ended June 30, 2005 were 379, down 15% from 444 units during the same period last year. Shipments of gas motorhomes for three-month period ended June 30, 2005 were 369, flat compared to the 369 gas units sold during the same period last year.

Net sales of $248.9 million for the six months ended June 30, 2005 increased $26.4 million or 11.9% from the same period last year. Wholesale unit shipments of diesel motorhomes were 785, up 7% from 737 units during the same period last year. Wholesale unit shipments of gas motorhomes were 770, down 11% from 868 units during the same period last year.

The increase in net sales is mainly attributable to the change in the sales mix to include more of the highline diesel motorhomes, which have higher average sales prices than midline diesel units and gas powered units.

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Gross profit and gross profit margin

	Three Months Ended June 30, Percent Change								Six Months Ended June 30, Percent Change
	2005					2004			2005					2004
						(Restated)								(Restated)
Gross profit	$	2,101		(78.1	)%	$	9,590		$	7,716		(53.7	)%	$	16,673
Gross profit margin	1.7		%	(78.8	)%	8.0		%	3.1		%	(58.7	)%	7.5		%

The gross profit margin for the three-month period ended June 30, 2005 was 1.7% compared to an 8.0% gross margin for the same period last year. For the first six months of 2005, the gross profit margin was 3.1% compared to a 7.5% gross profit margin for the same period last year. The primary factors that led to the decrease in gross margins were higher sales incentives, higher warranty costs, and production inefficiencies, partially offset by reduced workers’ compensation costs.

Selling expenses

	Three Months Ended June 30, Percent Change								Six Months Ended June 30, Percent Change
	2005					2004			2005					2004
						(Restated)								(Restated)
Selling expenses	$	3,315		28.1	%	$	2,587		$	6,954		31.3	%	$	5,295
as a percent of net sales	2.7		%			2.2		%	2.8		%			2.4		%

Selling expenses increased $0.7 million or 28.1% for the three-month period ended June 30, 2005 over the same period last year. Selling expenses for the six months ended June 30, 2005 increased $1.7 million or 31.3% over the same period last year. Selling expenses increased mainly due to higher media and marketing costs to support the Company’s dealer expansion and other initiatives, higher dealer convention expenses, and higher sales commissions resulting from higher sales.

General and administrative expenses

	Three Months Ended June 30, Percent Change								Six Months Ended June 30, Percent Change
	2005					2004			2005					2004
						(Restated)								(Restated)
General and administrative expenses	$	3,891		23.7	%	$	3,145		$	7,143		28.0	%	$	5,581
as a percent of net sales	3.1		%			2.6		%	2.9		%			2.5		%

General and administrative expenses totaling $3.9 million for the three-month period ended June 30, 2005 were up $0.7 million, or 23.7%, compared to the same period last year. For the first six months of 2005, general and administrative expenses were $7.1 million, representing an increase of $1.6 million, or 28.0%, compared to the same period last year. The increase in general and administrative expenses is due to higher audit and professional fees, as well as higher staffing levels to support increased sales and production and increased staffing to support ongoing Sarbanes-Oxley compliance.

Interest expense

	Three Months Ended June 30, Percent Change								Six Months Ended June 30, Percent Change
	2005					2004			2005					2004
Interest expense	$	311		1,843.8	%	$	16		$	588		653.8	%	$	78
as a percent of net sales	0.3		%			0.0		%	0.2		%			0.0		%

Interest expense for the three-month periods ended June 30, 2005 and 2004 was $0.31 million and $0.02 million, respectively. For the first six months of 2005, interest expense was $0.59 million compared to $0.08 million for the same period last year. The increase in interest expense is attributable to higher borrowings on the line of credit when compared to the same period last year.

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Other expense (income)

	Three Months Ended June 30, Percent Change								Six Months Ended June 30, Percent Change
	2005					2004			2005					2004
Other expense (income)	$	18		1,700.0	%	$	1		$	(91	)	93.6	%	$	(47	)
as a percent of net sales	0.0		%			0.0		%	0.0		%			0.0		%

Other expense for the three-month periods ended June 30, 2005 and 2004 was immaterial. Other income for the six months ended June 30, 2005 was mainly interest and fees related to the note receivable. Other income for the six months ended June 30, 2004 was mainly the gain on the sale of real property in Florida. As a percentage of net sales, the amount is immaterial.

Provision for income taxes

	Three Months Ended June 30, Percent Change								Six Months Ended June 30, Percent Change
	2005					2004			2005					2004
						(Restated)								(Restated)
Provision for income taxes	$	—		(100.0	)%	$	1,502		$	—		(100.0	)%	$	2,218
as a percent of net sales	0.0		%			1.2		%	0.0		%			1.0		%

As discussed in Note 8 to the consolidated financial statements included in this Form 10-Q/A, recent cumulative losses, the downturn in current market conditions and its impact on near-term earnings led the Company to conclude that it was more likely than not that its net deferred tax asset will not be realized. As a result, the Company continues to record a full valuation allowance against its net deferred tax assets; consequently, the Company’s current effective tax rate for 2005 is zero. The effective tax rate for the three and six months ended June 30, 2004 was 39.4% and 39.0%, respectively. The Company expects to record a full valuation allowance on future tax benefits until it can sustain an appropriate level of profitability.

Income (loss) from discontinued operations, net of taxes

	Three Months Ended June 30, Percent Change								Six Months Ended June 30, Percent Change
	2005					2004			2005					2004
						(Restated)								(Restated)
Income (loss) from discontinued operations, net of taxes	$	—		(100.0	)%	$	138		$	—		(100.0	)%	$	(410	)
as a percent of net sales	0.0		%			0.1		%	0.0		%			(0.2		)%

On September 24, 2004, the Company sold its Travel Trailer business assets to Weekend Warrior, a privately owned, California-based ramp-trailer manufacturer. The income from discontinued operations for the three-month period ended June 30, 2004 was $0.1 million. The loss for the six months ended June 30, 2004 was $0.4 million.

Liquidity and Capital Resources

At June 30, 2005 and December 31, 2004, the Company had cash and cash equivalents of $0.19 million and $0.01 million (excluding restricted cash totaling $0.03 million and $0.25 million, respectively, required to secure a letter of credit in connection with one of the Company’s insurance policies), respectively. During the first six months of 2005, the Company financed its operations primarily through its existing working capital and its line of credit with UPS Capital Corporation (UPSC).

During the six-month period ended June 30, 2005 the Company provided $2.7 million of cash in its operations, with the two largest contributing factors being a $13.5 million increase in accounts payable and a $4.0 million increase in accrued expenses, and the two largest offsetting factors being an $8.7 million increase in inventories and a net loss of $6.9 million. During the six-month period ended June 30, 2004 the Company used $1.4 million of cash in its operations, with the two largest contributing factors being a $13.4

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million increase in inventories and a $10.2 million increase in receivables, and the largest offsetting factor being a $13.0 million increase in accounts payable.

On June 30, 2005, the Company had working capital of $40.9 million compared to $49.1 million at December 31, 2004. This decrease of $8.2 million was primarily due to a $13.5 million increase in accounts payable and a $4.2 million increase in current accrued expenses, partially offset by a $7.1 million increase in inventories and a $3.9 million increase in receivables.

For the six-month period ended June 30, 2005, net cash used in investing activities was $1.4 million, consisting primarily of $2.9 million in capital expenditures, partially offset by repayments on note receivable of $1.4 million. Net cash used in financing activities was $1.1 million, primarily due to a decrease in the book overdraft of $0.8 million and net payments on the line of credit of $0.5 million.

At June 30, 2005, the Company had an asset-based revolving credit facility of $20 million with UPSC, which was scheduled to expire in August 2005. At June 30, 2005 and December 31, 2004, the Company had outstanding loans under the line of credit of $12.2 million and $12.7 million, respectively. At June 30, 2005, the Company was in default with the covenant requiring delivery of the Company’s annual financial statements within a required period of time and on that date the Company received an extension letter from UPSC waiving the default on the Company’s required delivery date of its annual financial statements and extending the required delivery date of the annual financial statements to August 31, 2005 (which date was extended to December 15, 2005 as part of the execution of the new credit facility discussed below).

On August 12, 2005, the original facility was replaced by a new three-year asset-based revolving credit facility with UPSC and Wells Fargo Bank for $25 million, with the Company having the option, subject to certain conditions, of increasing the revolver in $5 million increments up to a total credit facility of $40 million. On September 29, 2005, the Company effected such an increase in the amount of the credit facility from $25 million to $30 million. The new credit facility is collateralized by all of the Company’s assets other than real estate. Borrowing availability is based on eligible accounts receivable and inventory. The facility also includes a requirement to maintain a blocked account arrangement, whereby remittances from the Company’s customers reduce the debt outstanding. The new credit facility contains, among other provisions, certain financial covenants, including funded debt to EBITDA, and a fixed charge coverage ratio. If these financial covenants are not met, the Company’s availability under the credit facility will be reduced. The Company did not meet these financial covenants as of June 30, 2005, and does not expect to until September 30, 2006. Until these covenants are met, the Company’s average borrowings availability under its $40 million facility is limited to an amount between $27 to $32 million, depending on eligible inventory and accounts receivable. Initial amounts borrowed under the revolving credit facility bear interest at the prime rate listed in the Wall Street Journal plus 0.50 percentage points and may be subsequently adjusted down based on a trailing twelve month funded debt to EBITDA calculation. At June 30, 2005 the interest rate on the outstanding borrowings under the line of credit was 7.00%. The weighted average interest rate for the borrowings under the line of credit during the six-month period ended June 30, 2005 and 2004 was 6.47% and 4.80%, respectively.

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

In order to fund on-going operations in the short-term, the Company remains dependent upon its ability to utilize outside financing through borrowings on its line of credit until it achieves sustained operational profitability through a combination of increased sales, cost reductions and improved product margins. The Company believes it has sufficient financial resources to fund its operations in the short-term. However, the Company’s ability to meet its obligations in the long-term is dependent on its ability to generate positive cash flows from operations. If management is unable to achieve its operational profitability plan or unforeseen events occur, the Company may need to implement alternative plans that could include long-term financing collateralized by real estate or obtaining additional debt financing, additional reductions in operating costs, deferral of capital expenditures, and further reductions in working capital. While the Company believes that it could successfully complete the alternative plans, if necessary, there can be no assurance that such alternatives would be available on acceptable terms and conditions or that the Company would be successful in its implementation of such plans.

As further discussed in Note 6 to the consolidated financial statements included in this Form 10-Q/A, the Company generally agrees with its dealers’ lenders to repurchase any unsold RVs in the event of various circumstances. The Company’s maximum potential exposure under these agreements approximated $177 million at June 30, 2005. As with receivables, the risk of loss under the repurchase agreements was spread over a number of dealers and lenders and was reduced by the resale value of the RVs, which the Company would be required to repurchase. Losses under these agreements have not been material in the past and management does

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not believe that any future losses under such agreements will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

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

Recent Accounting Pronouncements

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

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

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123R), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” (SFAS No. 123) and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first annual period after June 15, 2005, with early adoption encouraged. The pro forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition. The Company is required to adopt SFAS No. 123R in the first calendar quarter of 2006, beginning January 1, 2006. Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include modified prospective and modified retrospective adoption options. Under the modified retrospective option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The modified prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the modified retrospective method would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. The Company is evaluating the requirements of SFAS No. 123R. The Company has not yet determined the method of adoption or the effect of adopting SFAS No. 123R, and the Company has not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS No. 123.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB No. 20 and FAS No. 3” (SFAS No. 154). SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS No. 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. The correction of an error in previously issued financial statements is not an accounting change. However, the reporting of an error correction involves adjustments to previously issued financial statements similar to those generally applicable to reporting an accounting change retrospectively. Therefore, the reporting of a correction of an error by restating previously issued financial statements is also addressed by SFAS No. 154. SFAS No. 154 is required to be adopted in fiscal years beginning after December 15, 2005. The Company does not believe that adoption of this standard will have an impact on its consolidated financial statements.

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NATIONAL R.V. HOLDINGS, INC.
PART I, ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk

The Company has no significant financial instruments. The Company does not have any significant foreign currency exposure because it does not transact business in foreign currencies. However, the Company is exposed to interest rate changes related primarily to cash borrowings on the Company’s credit facility. The weighted average interest rate for the borrowings on the credit facility during the six-month period ended June 30, 2005 was 6.47%. For every 0.25% increase in interest rates, the Company would expect a quarterly increase in interest expense of approximately $0.6 thousand for each $1.0 million borrowed.

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NATIONAL R.V. HOLDINGS, INC.
PART I, ITEM 4 — CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as the Company’s are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In connection with the preparation of its Quarterly Report on Form 10-Q, as of June 30, 2005, an evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). In light of the material weaknesses referenced below, which the Company first identified in connection with the assessment required by Section 404 of the Sarbanes-Oxley Act of 2002 and disclosed in its Form 10-K/A for the year ended December 31, 2004 and which continued to exist as of the end of the period covered by this report, the Company’s CEO and CFO concluded that, as of the end of the period covered by this report, the disclosure controls and procedures were not effective at a reasonable assurance level as of June 30, 2005.

Internal Control over Financial Reporting

A material weakness is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As of December 31, 2004, we identified the following material weaknesses in the Company’s internal control over financial reporting, which continued to exist as of June 30, 2005:

1. Insufficient personnel resources and technical expertise within its accounting function - The Company did not maintain effective controls over the financial reporting process because of insufficient personnel resources and technical expertise within the accounting function. This material weakness contributed to the following individual material weaknesses: (a) errors in the preparation and review of schedules and reconciliations supporting certain general ledger account balances. As a result, errors were not detected in the amortization of leasehold improvements and certain accrued liability accounts, including sales and marketing, warranty, legal and workers’ compensation, and the related income statement accounts, including cost of goods sold, selling and general and administrative expenses; (b) inadequate financial statement disclosures, primarily related to the presentation of certain balances within the restatement footnote, sale of a division and capital leases were not identified by the corporate accounting staff; and (c) accounting cutoff errors primarily related to marketing accrued expenses and an inability to properly and timely account for capital leases entered into during the year were not identified at the NRV division. This control deficiency resulted in audit adjustments to the 2004 annual consolidated financial statements affecting accrued liabilities, property, plant and equipment, and the related income statement accounts, primarily cost of goods sold, selling, general and administrative, amortization and interest, and restatement of disclosures in the 2004 annual consolidated financial statements. Insufficient personnel resources and technical expertise also contributed to the material weaknesses discussed in 2, 3, 4 and 5 below. Additionally, these control deficiencies could result in misstatements in the aforementioned accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

2. Revenue Recognition — The Company did not maintain effective controls over the timing of the revenue recognition related to the sale of certain motorhomes at its NRV division. Specifically, under a deferred payment arrangement the Company held the manufacturer’s certificate of origin as security for payment. This control deficiency resulted in the restatement of the Company’s third quarter 2004 consolidated financial statements to correct the timing of revenue recognition. This control deficiency also resulted in audit adjustments to the 2004 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of revenue and deferred revenue that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

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3. Accounting for Sales Incentives - The Company did not maintain effective controls over the accounting for sales incentives. Specifically, certain sales incentive programs which are paid directly to dealers or dealers’ sales representatives were improperly classified as selling expenses and should have been classified as a reduction of revenue. This control deficiency resulted in the restatement of the Company’s 2003 and 2002 consolidated financial statements. This control deficiency also resulted in audit adjustments to the 2004 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of revenue and selling expenses that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

4. Accounting for Income Taxes - The Company did not maintain effective controls over the determination and reporting of the provision for income taxes and related deferred income tax balances. Specifically, the Company did not maintain effective controls to review and monitor the accuracy of the valuation allowance as well as other components of the income tax provision calculations and related deferred income taxes. This control deficiency resulted in an audit adjustment to the fourth quarter 2004 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of the income tax provision or related deferred income tax balances that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

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

6. Unrestricted access to programs and data - The Company did not maintain effective controls over access to certain financial application programs and data at its NRV division. Specifically, there were instances in which information technology personnel and users with accounting and reporting responsibilities had access to financial accounting application programs and data that was incompatible with their functional business requirements. Further, the activities of these individuals were not subject to independent monitoring. These control deficiencies applied to certain systems and processes including the financial statement preparation, human resources, payroll, purchasing, receiving and revenue and billing. These control deficiencies did not result in an adjustment to the 2004 interim or annual consolidated financial statements. However, these control deficiencies could result in a misstatement to financial statement accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Remediation of Material Weaknesses

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

1. Insufficient personnel resources and technical expertise within its accounting function

Management has assessed the organization of its accounting personnel and the technical expertise within the accounting function. As a result, the Company has established an accounting function at the parent company level. The NRV divisional controller was promoted to Corporate Controller and will be responsible for setting and establishing accounting policies for the Company and its two divisions in accordance with generally accepted accounting principles (“GAAP”) and guidelines required by the Securities and Exchange Commission (“SEC”). To assist the Corporate Controller, the Company has also promoted an individual to a newly created position of Manager of Financial Reporting. In addition, the Company has subscribed to an on-line research tool to assist this group in staying abreast of new accounting pronouncements, proper accounting disclosure and also research technical accounting issues relating to the Company’s ongoing business transactions. At the NRV division, the Company has hired a new Controller and Accounting Manager. As a result of the re-organization of its accounting personnel and increased technical expertise within the accounting function, management believes that these actions will remediate the material weaknesses described in items (a), (b) and (c) above. As of the date of the filing of the 2005 Form 10-K, the Company has not fully remediated the material weakness in the Company’s internal control over financial reporting. However, during fiscal year 2006, management has taken a number of steps that it believes will impact the effectiveness of our internal control over financial reporting. Management has not completed its 2006 assessment of internal control over financial reporting. Upon completion of the 2006 assessment, management will report on internal control over financial reporting and the status of remediation.

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2. Revenue Recognition

Effective April 1, 2005, the NRV division discontinued the deferred payment arrangement under which it held the manufacturer’s certificate of origin as security for payment. During the second quarter of 2005, the NRV division revised its quarterly closing procedures to strengthen its review of any new agreements or other terms to determine whether the related transactions are accounted for in the proper period. As a result of the discontinued deferred payments arrangements and additional control procedures implemented, management believes that these actions will remediate this material weakness. This material weakness was remediated as of December 31, 2005.

3. Accounting for Sales Incentives

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

4. Accounting for Income Taxes

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

5. Physical inventory process

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

6. Unrestricted access to programs and data

The NRV division has corrected access rights for known instances in which information technology personnel and users with accounting and reporting responsibilities had access to financial accounting applications programs and data that was incompatible with their functional business requirements. The NRV division is also in the process of refining and developing ongoing processes to ensure that proper access rights are granted, reviewed and maintained in a timely manner. As a result of the correction of access rights of information technology personnel and users with accounting and reporting responsibilities and additional control procedures implemented, management believes that these actions will remediate this material weakness. This material weakness was remediated as of December 31, 2005.

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

Changes in Internal Control over Financial Reporting

Except as disclosed above, there have been no changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Table of Contents

NATIONAL R.V. HOLDINGS, INC.

PART II - - OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

At June 30, 2005, the Company was in default with the covenant of its credit facility with UPS Capital Corporation (“UPSC”) requiring delivery of the Company’s annual consolidated financial statements within a required period of time and on that date the Company received an extension letter from UPSC waiving the default on the Company’s required delivery date of the annual consolidated financial statements to August 31, 2005. Such date was extended to December 15, 2005 as part of the execution by the Company of a new credit facility on August 12, 2005 with UPSC and Wells Fargo Bank. The Company filed its Annual Report on Form 10-K with the Securities and Exchange Commission on October 11, 2005.

ITEM 6. EXHIBITS

Exhibits

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Table of Contents

SIGNATURE

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

	NATIONAL R.V. HOLDINGS, INC.
	(Registrant)
Date: June 23, 2006	By	/s/ THOMAS J. MARTINI
		Thomas J. Martini
		Chief Financial Officer
		(Principal Accounting and
		Financial Officer)

29

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Bradley C. Albrechtsen, certify that:

1.I have reviewed this quarterly report on Form 10-Q/A of NATIONAL RV HOLDINGS, 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-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 quarterly 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; and

5.The registrant’s other certifying officer 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 control over financial reporting.

Date: June 23, 2006
	/s/ Bradley C. Albrechtsen
	Bradley C. Albrechtsen
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Thomas J. Martini, certify that:

1.I have reviewed this quarterly report on Form 10-Q/A of NATIONAL RV HOLDINGS, 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-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 quarterly 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; and

5.The registrant’s other certifying officer 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 control over financial reporting.

Date: June 23, 2006
	/s/ Thomas J. Martini
	Thomas J. Martini
	Chief Financial Officer
	(Principal Accounting and Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of National RV Holdings, Inc. (the “Company”) on Form 10-Q/A for the period ending June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Bradley C. Albrechtsen, Chief Executive Officer and President of the Company, and Thomas J. Martini, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Bradley C. Albrechtsen	/s/ Thomas J. Martini
Bradley C. Albrechtsen	Thomas J. Martini
Chief Executive Officer	Chief Financial Officer
and President	(Principal Accounting and
Date: June 23, 2006	Financial Officer)
	Date: June 23, 2006