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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-Q

(MARK ONE)

For the quarterly period ended June 30, 2004

OR

For the transition period from __________________to__________________

Commission file number 1-7160

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).   Yes X No  

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

      At July 31, 2004:

FORM 10-Q

INDEX

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Coachmen Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)

See Notes to Consolidated Financial Statements.

3

Coachmen Industries, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)

See Notes to Consolidated Financial Statements.

4

Coachmen Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

See Notes to Consolidated Financial Statements.

5

Coachmen Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

See Notes to Consolidated Financial Statements.

6

Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

1.         BASIS OF PRESENTATION

2.         SEGMENT INFORMATION

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3.     INVENTORIES

        Inventories consist of the following:

4.     ACCRUED EXPENSES AND OTHER LIABILITIES

        Accrued expenses and other liabilities consist of the following:

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      Changes in the Company’s warranty liability during the three and six month periods ended June 30 were as follows:

			Three Months Ended June 30,						Six Months Ended June 30,
				2004			2003			2004			2003
							(in thousands)
Balance of accrued warranty
at beginning of period			$	9,484		$	7,868		$	8,658		$	8,796
Warranties issued during
the period and changes in
liability for pre-existing
warranties				6,114			3,700			11,838			6,692
Cash settlements made during
the quarter				(5,088	)		(4,038	)		(9,986	)		(7,958	)
Balance of accrued warranty
at June 30			$	10,510		$	7,530		$	10,510		$	7,530

5.     EARNINGS PER SHARE

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6.     COMPREHENSIVE INCOME (LOSS)

7.      COMMITMENTS, CONTINGENCIES AND GUARANTEES

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8.      STOCK-BASED COMPENSATION

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9.      RECLASSIFICATION

10.    SUBSEQUENT EVENTS

11.    NEW ACCOUNTING PRONOUNCEMENTS

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Coachmen Industries, Inc. and Subsidiaries
Management’s Discussion and Analysis
Of Financial Condition and Results of Operations

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

A summary of the changes in the principal items included in the consolidated statements of operations is shown below.

n/m – not meaningful

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NET SALES

Consolidated net sales for the quarter ended June 30, 2004 were $234.9 million, an increase of $61 million, or 35.1%, from the $173.9 million reported for the corresponding quarter last year. Net sales for the six months were $436.1 million, representing an increase of 36.2% from the $320.3 million reported for the same period in 2003. The Company’s recreational vehicle segment experienced a net sales increase of 44.1% for the quarter and an increase of 43.8% for the six-months. For the RV segment, sales dollars for motorized products posted a significant increase during the quarter as compared to the same period in 2003. Wholesale unit shipments for the RV segment increased 15.4% during the second quarter of 2004 and 15.7% for the six-month period ended June 30, 2004. Wholesale unit shipments of motorized products increased 60.5% and 50.8% for the three and six month periods ended June 30, 2004, respectively, while wholesale unit shipments of towable products were up 2.4% and 4.3% for the same periods. Unit backlog for the RV Group was up 30.1% at June 30, 2004 compared to the same date in 2003.

The Company’s housing and building segment experienced a net sales increase for the 2004 quarter of 17.2% and an increase of 18.8% for the six months. This increase in sales dollars was principally attributable to wholesale unit shipments being up 5.5% for the quarter and 8.1% for the six-month period ended June 30, 2004. During the second quarter, the housing and building segment continued to experience an increase in the average sales price per unit. The increased sales price per unit was a result of product mix and sales price increases and surcharges related to increased cost of raw materials, particularly lumber. Unit backlogs, measured in floors for the housing and building segment, were up 58.1% at June 30, 2004 as compared to the same date in 2003.

COST OF SALES

Cost of sales increased 35.7%, or $52.2 million, for the three months and 36%, or $99.2 million, for the six months ended June 30, 2004. As a percentage of net sales, cost of sales was 84.5% and 86.0% for the three and six months ended June 30, 2004 compared to 84.2% and 86.1% for the three and six months ended June 30, 2003. The increase in the dollar amount of cost of sales in the current quarter and year to date is attributable to the increase in sales dollars. The increase in the cost of sales percentage to net sales for the second quarter was primarily driven by increased sales in the period by the recreational vehicle segment, which carries lower margins than the housing and building segment.

OPERATING EXPENSES

As a percentage of net sales, operating expenses, which include delivery, selling, general and administrative expenses, were 12.1% and 12.4% for the 2004 quarter and six-month period compared to 12.9% and 13.7% for the quarter and six-month period of 2003. As a percentage of sales, delivery expenses decreased by .4 percentage points for the three and six-month periods as compared to the prior year three and six-month periods. The increase in delivery dollars spent was primarily related to variable delivery costs for the higher volume of units shipped while the improvement as a percentage of sales was primarily the result of better utilization of the Company’s transportation equipment associated with the increase in sales volume for the three and six months ended June 30, 2004. Selling expenses were 3.7% of net sales for the quarter in both 2004 and 2003 and 3.6% of net sales for the six months ended June 30, 2004 compared to 3.8% of net sales for the six months ended June 30, 2003. The increase in selling expense dollars during the quarter and six months ended June 30, 2004 is related to increased personnel costs and increased expenses related to new product shows. The decrease in selling expenses as a percentage of sales for the six-month period ended June 30, was primarily related to increased sales volume. General and administrative expenses were 4.1% of net sales for the second quarter compared to 4.4% for the 2003 corresponding quarter and 4.4% of net sales for the six-month period compared to 5.1% for 2003. The decrease for the quarter and six-month period in general and administrative expenses as a percentage of net sales was related to the increased sales volume.

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GAIN ON THE SALE OF PROPERTIES, NET

For the six months ended June 30, 2004, the gain on the sale of properties was $1,079,000. The major component of the gain in 2004 was from the sale of the Goshen facility. In late March 2004, Coachmen RV Company sold its 70,000 square-foot facility in Goshen, Indiana, and moved production to a newly acquired replacement facility located five miles north of its Middlebury, Indiana complex. There were no significant gains or losses from property transactions for the three months ended June 30, 2004, nor were there any significant gains or losses from property transactions for the three or six months ended June 30, 2003.

INTEREST EXPENSE

Interest expense was $477,000 and $890,000 for the quarter and six-month periods in 2004 compared to $372,000 and $734,000 in the same periods last year. Interest expense varies with the amount of average outstanding long-term debt and borrowings on the Company’s revolving credit facility.

INVESTMENT INCOME (LOSS)

There was a net investment income of $347,000 for the quarter ended June 30, 2004 compared to an investment loss of $495,000 in the same quarter of 2003. For the six-month period, the net investment income of $1,275,000 compared to an investment loss of $100,000 the previous year. The investment income for the three-month period ended June 30, 2004 was principally attributable to earnings of the life insurance policies held. The investment loss for the three-month period ended June 30, 2003 was principally attributable to realized losses incurred from the sale of preferred stocks and an other-than-temporary impairment charge of $488,000 to adjust to market value the carrying cost of certain preferred stocks held by the Company. The investment income for the six-month period ended June 30, 2004 was attributable to a cumulative preferred dividend of $536,000 from a utility company emerging from bankruptcy and earnings of the life insurance policies held. The investment loss of $100,000 for the six months ended June 30, 2003 was attributable to realized losses incurred from the sale of preferred stocks and an other-than-temporary impairment charge of $488,000 to adjust to market value the carrying cost of certain preferred stocks held by the Company offset by improved performance of the Company’s other investments.

OTHER INCOME, NET

Other income, net, represents income of $26,000 for the second quarter of 2004 and income of $38,000 for the same quarter of the previous year. For the six-month period, other income, net for 2004 was $86,000 compared to income of $100,000 in 2003. No items of significance caused the variances between the comparable quarters.

INCOME TAXES

For the second quarter ended June 30, 2004, the effective tax rate was 33.8% and the year-to-date rate was 33.9% compared with a 2003 second quarter rate of 34.4% and year-to-date rate of 33.3%. The Company’s effective tax rate fluctuates based upon the states where sales occur, with the level of export sales and also with the amount of nontaxable dividend income on investments.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

The Company generally relies on funds from operations as its primary source of liquidity. In addition, the Company maintains a $35 million, unsecured revolving credit facility to meet its seasonal working capital needs. On July 30, 2004, the Company entered into an Amendment to the Credit Agreement which provides for a term loan of $7.5 million. At June 30, 2004, primarily due to increases in inventories and accounts receivable, there were outstanding borrowings of $25.5 million against this bank line of credit. At June 30, 2003, there were no borrowings outstanding against the credit facilities. For the six months ended June 30, 2004, the major use of cash was from operating activities, which primarily consisted of increases in receivables and inventories offset by an increase in accounts payable and other accrued expenses. The cash

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used in investing activities for the six months ended June 30, 2004 was primarily the result of acquisitions of property and equipment to increase manufacturing capacity to meet expected production needs. The cash provided by financing activities was primarily the result of net borrowings against credit facilities offset by the payment of cash dividends.

At June 30, 2004, working capital increased slightly to $96.9 million from $96.0 at December 31, 2003. The $40.0 million increase in current assets at June 30, 2004 versus December 31, 2003 was primarily due to increased trade receivables and inventories as a result of increased sales. The increase in current liabilities of $39.1 million was substantially due to increased trade payables, borrowings against credit facilities, payroll related accruals and other accrued expenses.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain statements that are “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on management’s expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks and uncertainties, and are dependent on various factors, many of which are outside the control of the Company. These uncertainties and other factors include, but are not limited to, the potential fluctuations in the Company’s operating results; the condition of the telecommunications industry which purchases modular structures; the availability and price of gasoline and diesel fuel, which can impact the sale of recreational vehicles; the availability of chassis and appliances, which are used in the production of many of the Company’s recreational vehicle products; interest rates, which affect the affordability of the Company’s products; the availability and cost of real estate for residential housing; potential liabilities under repurchase agreements and guarantees; changing government regulations, such as those covering accounting standards, environmental matters or product warranties and recalls, which may affect costs of operations, revenues, product acceptance and profitability; legislation governing the relationships of the Company with its recreational vehicle dealers, which may affect the Company’s options and liabilities in the event of a general economic downturn; the impact of economic uncertainty on high-cost discretionary product purchases, which can hinder the sales of recreational vehicles; the demand for commercial structures in the various industries that the housing and building segment serves; the ability of the housing and building segment to perform in new market segments where it has limited experience; the impact of performance on the valuation of intangible assets; and also on the state of the recreational vehicle and housing industries in the United States. Other factors affecting forward-looking statements include the cyclical and seasonal nature of the Company’s businesses, adverse weather conditions affecting home deliveries, changes in property taxes and energy costs, changes in federal income tax laws and federal mortgage financing programs, changes in public policy, competition in these industries, the Company’s ability to maintain or increase gross margins which are critical to profitability whether there are or are not increased sales, further developments in the war on terrorism and related international crises and other risks and uncertainties. In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposure. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results may therefore appear to be volatile in certain accounting periods. The foregoing lists are not exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements.

At times, the Company’s actual performance differs materially from its projections and estimates regarding the economy, the recreational vehicle and building industries and other key performance indicators. Readers of this Report are cautioned that reliance on any forward-looking statements involves risks and uncertainties. Although the Company believes that the assumptions on which the forward-looking statements contained herein are reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurrence or nonoccurrence of future events. There can be no assurance that the forward-looking statements contained in this Report will prove to be accurate. The inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company’s objectives will be achieved. For further discussion of the elements involved in this Report, see the notes and other materials included with the Company’s latest Annual Report on Form 10-K.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, operations of the Company are exposed to fluctuations in interest rates. These fluctuations can vary the costs of financing and investing yields. The Company has utilized its short-term revolving credit facility during the first six months of 2004 for working capital needs resulting from an increase in inventories and accounts receivable. At June 30, 2004, the Company had $26.5 million of borrowings on the revolving credit facility and current maturities of long-term debt. Long-term debt at June 30, 2004 was $9.2 million and consisted mainly of industrial development revenue bonds that have variable or floating rates. In January of 2003, the Company entered into various interest rate swap agreements that became effective in October of 2003. These swap agreements, which are designated as cash flow hedges for accounting purposes, effectively convert a portion of the Company’s variable-rate borrowings to a fixed-rate basis through November of 2011, thus reducing the impact of changes in interest rates on future interest expense. The fair value of the Company’s interest rate swap agreements represents the estimated receipts or payments that would be made to terminate the agreements.

A gain of $.1 million, net of taxes, attributable to changes in the fair value of interest rate swap agreements was recorded as a component of accumulated other comprehensive gain (loss) during the second quarter of 2004. Total accumulated loss on the swap agreements as of June 30, 2004 was $.1 million. If in the future the interest rate swap agreements were determined to be ineffective or were terminated before the contractual termination dates, or if it became probable that the hedged variable cash flows associated with the variable-rate borrowings would stop, the Company would be required to reclassify into earnings all or a portion of the unrealized losses on cash flow hedges included in accumulated other comprehensive gain (loss).

At June 30, 2004, the Company had $4.1 million invested in marketable securities. The Company’s marketable securities consist of public utility preferred stocks, which typically pay quarterly fixed-rate dividends. These financial instruments are subject to market risk in that available energy supplies and changes in available interest rates would impact the market value of the preferred stocks. The Company utilizes U.S. Treasury bond futures options as a protection against the impact of increases in interest rates on the fair value of the Company’s investments in these fixed-rate preferred stocks. Outstanding options are marked to market with market value changes recognized in current earnings. The U.S. Treasury bond futures options generally have terms ranging from 90 to 180 days. Based on the Company’s overall interest rate exposure at June 30, 2004, including variable or floating rate debt and derivatives used to hedge the fair value of fixed-rate preferred stocks, a hypothetical 10 percent change in interest rates applied to the fair value of the financial instruments as of June 30, 2004, would have no material impact on earnings, cash flows or fair values of interest rate risk sensitive instruments over a one-year period.

ITEM 4.  CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2004. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2004.

During the period covered by this report, there have been no material changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

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

     (a)     The annual meeting of the shareholders of Coachmen Industries, Inc. was held on April 29, 2004.

     (b)     The following nominees were elected Directors for three-year terms expiring in 2007:

                    Robert J. Deputy
                    Edwin W. Miller

     (c)     The tabulation of votes for each Director nominee was as follows:

	For	Withheld
Robert J. Deputy	14,562,406	91,262
Edwin W. Miller	14,112,228	541,441

               The terms of office of the following directors continued after the meeting:

                    Geoffrey B. Bloom, Thomas H. Corson, Donald W. Hudler, William P. Johnson, Philip G. Lux,
                    Rex Martin, Claire C. Skinner

Item 6.  Exhibits and Reports on Form 8-K

    (a)        Exhibits

    (b)        Reports on Form 8-K during the quarter ended June 30, 2004

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SIGNATURES

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

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INDEX TO EXHIBITS