SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

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

Registrant’s Telephone Number including Area Code: (914) 428-9098
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act:

Common Stock
(Title of Class)

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_|

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

Aggregate market value of voting stock (Common Stock, $.01 par value) held by non-affiliates of Registrant (computed by reference to the closing price as of March 3, 2004) was $282,472,251.

The number of shares outstanding of the Registrant’s Common Stock, as of the latest practicable date (February 27, 2004) was 10,234,883 shares of Common Stock.

Documents Incorporated by Reference

Proxy Statement with respect to the 2004 Annual Meeting of Stockholders to be held on May 20, 2004 is incorporated by reference into Items 10, 11, 12 and 14 of Part III.

FORWARD LOOKING STATEMENTS AND RISK FACTORS

              This Form 10-K and the documents incorporated by reference contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities for existing products, plans and objectives of management, markets for Drew Industries Incorporated (“Drew” or the “Company”) common stock and other matters. Statements in this Form 10-K, including those incorporated by reference, that are not historical facts are “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act. Forward-looking statements, including, without limitation those relating to our future business prospects, revenues and income, wherever they occur in this Form 10-K, are necessarily estimates reflecting the best judgment of our senior management, at the time such statements were made, and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by forward-looking statements. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. You should consider forward-looking statements, therefore, in light of various important factors, including those set forth in this Form 10-K.

              There are a number of factors, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors include pricing pressures due to competition, raw material costs (particularly steel, vinyl, aluminum, glass, and ABS resin), availability of retail and wholesale financing for manufactured homes, availability and costs of labor, inventory levels of retailers and manufacturers, levels of repossessed manufactured homes, the financial condition of our customers, interest rates, and adverse weather conditions impacting retail sales. In addition, national and regional economic conditions and consumer confidence may affect the retail sale of recreational vehicles and manufactured homes.

PART I

Item 1. BUSINESS.

Introduction

              Drew has two reportable operating segments, the recreational vehicle products segment (the “RV Segment”) and the manufactured housing products segment (the “MH Segment”). Drew’s wholly-owned subsidiaries, Kinro, Inc. and its subsidiaries (“Kinro”) and Lippert Components, Inc. and its subsidiaries (“Lippert”), each have operations in both the RV Segment and the MH Segment.

              Kinro manufactures and markets primarily aluminum windows and doors for recreational vehicles, and vinyl and aluminum windows and screens and thermo-formed bath and shower units for manufactured and modular homes. Lippert manufactures and markets primarily steel chassis, steel chassis parts, slide-out mechanisms and related power units, and electric stabilizer jacks for recreational vehicles, and steel chassis and steel chassis parts for manufactured homes.

              Since 1980, the Company has acquired fifteen manufacturers of products for both manufactured homes and recreational vehicles, expanded its geographic market and product lines, added manufacturing facilities, integrated manufacturing, distribution and administrative functions, and developed new and innovative products. As a result, at December 31, 2003, the Company operated 41 manufacturing facilities in 17 states and one in Canada, and achieved consolidated sales of $353 million for 2003.

              The Company was incorporated under the laws of Delaware on March 20, 1984, and is the successor to Drew National Corporation, which was incorporated under the laws of Delaware in 1962. The Company’s principal executive and administrative offices are located at 200 Mamaroneck Avenue, White Plains, New York 10601; telephone number (914) 428-9098; website www.drewindustries.com; e-mail drew@drewindustries.com. The Company makes available free of charge on its website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K (and amendments to those reports) filed with the Securities and Exchange Commission as soon as reasonably practicable after such materials are electronically filed.

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Recent Events

              On July 17, 2003, the Company acquired Kansas-based LTM, with annual sales of approximately $4.5 million. LTM, the holder of several innovative patents, manufactures a variety of products for RVs, including slide-out mechanisms and specialty slide-out trays for batteries, LP tanks and storage, as well as electric stabilizer jacks, flexguard slide-out wire protection systems, and slide-out patio decks. The purchase price was $4.1 million, including $250,000 of LTM’s debt which the Company repaid on closing. The purchase price was funded with $3.8 million of the Company’s available cash and a $350,000 note to the seller, bearing interest at the prime rate, payable in equal installments over the next five years.

              On October 3, 2003, the Company acquired certain assets and liabilities of Indiana-based ET&T Frames, Inc. (“ET&T”), with annual sales of approximately $7 million. ET&T manufactures chassis primarily for specialty trailer units, consisting of park models, office units, cargo trailers and, to a lesser extent, chassis for towable recreational vehicles. This acquisition represents an expansion of the Company’s chassis manufacturing business into specialty chassis. The $3.6 million purchase price included the accounts receivable and certain inventory and fixed assets of ET&T. Production of ET&T’s products was immediately transferred to the Company’s existing factories, without adding any overhead. The purchase price was funded with the Company’s available cash.

              The Company received notification in November 2003 from Institutional Stockholders Services, Inc., (“ISS”) a Rockville, Maryland-based independent research firm that advises institutional investors, that the Company’s corporate governance policies outranked 99.9 percent of all companies listed in the Russell 3000 index. The Company has no business relationships with ISS.

              On December 11, 2003, the Company’s stock began trading on the New York Stock Exchange (NYSE) under the stock ticker symbol “DW.” Concurrent with the NYSE listing, the Company’s shares were withdrawn from the American Stock Exchange. The Company believes that listing its stock on the NYSE will result in greater exposure to the investment community, while also providing a more liquid, trading environment for the Company’s stockholders.

              In mid-December 2003 and continuing into 2004, the Company was notified by its steel suppliers of unprecedented steel cost increases, which through February 2004 have aggregated more than 60 percent. Steel is one of the Company’s primary raw materials. This situation apparently arose as the result of an increase in world-wide steel demand, particularly in China. In addition, due to the weakened value of the United States dollar, which has declined about 15 percent versus the euro over the last year, and the increased cost of oceanic shipping, it has become uneconomical to import steel.

              In response to the steel cost increases, the Company took the following immediate actions: a) contacted other steel vendors, both domestic and foreign, in an attempt to obtain better pricing, but to no avail; b) ordered as much steel as possible in December 2003, and January and February 2004, before the monthly cost increases became effective in each month; c) raised prices to customers, which was followed with a second round of price increases; and d) cut operating costs wherever possible. These actions were taken quickly and as a result, the steel cost increases to date are not expected to have a significant effect on 2004 results.

              In February 2004, the Company sold certain intellectual property rights relating to a process used to manufacture a new composite material. Simultaneously with the sale, the Company entered into an equipment lease and a license agreement with the buyer. As a result, the Company plans to use the new composite material to produce certain bath products for the manufactured housing, modular housing, and recreational vehicle industries on an exclusive, royalty-free basis. This new composite material will enable the Company to compete against fiberglass bath products in these industries. The Company will also have the right to use the new composite material on a royalty-free, non-exclusive basis to manufacture various other products for the manufactured housing, modular housing, and recreational vehicle industries. Sales of these products, if any, are not expected to be significant in 2004.

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              The sale price for the intellectual property rights was $4.0 million, consisting of cash of $100,000 at closing and a note of $3.9 million, payable over five years. The note bears interest at increasing annual interest rates, and is secured by a lien on the intellectual property rights sold, a right of offset against the lease, and a guaranty. The note is convertible by the Company into an equity interest in any new venture that the buyer may form to promote this process. In February 2004, the Company received the first payment under the note for $400,000.

              The Company is evaluating the potential gain on sale, and currently anticipates that it will record a first quarter pre-tax gain of approximately $500,000 ($300,000, or $.03 per diluted share, after tax) after all related costs and valuations. Future gain, if any, will be recorded when any payments on the remaining $3.5 million balance of the note are received.

Recreational Vehicles Products Segment

              Through its wholly-owned subsidiaries, the Company manufactures and markets a number of components for recreational vehicles, primarily travel trailers and fifth wheels, including aluminum windows, a variety of doors, steel chassis, steel chassis parts, RV slide-out mechanisms and related power units, and electrical stabilizer jacks. In 2003, the RV Segment represented approximately 62% of the Company’s consolidated sales, and 63% of consolidated segment operating profit.

              Raw materials used by the Company’s RV Segment, consisting of fabricated steel (coil, sheet, tube and I-beam), extruded aluminum, glass, and various adhesive and insulating components, are available from a number of sources.

              Operations of the Company’s RV Segment consist primarily of fabricating, welding, painting and assembling components into finished products, and tempering glass for its own use and for sale to other window manufacturers. The Company’s RV Segment operations are conducted at 27 manufacturing and warehouse facilities throughout the United States and one in Canada, strategically located in proximity to the customers they serve. Of these facilities, eight also conduct operations in the Company’s MH Segment. See Item 2. “Properties.”

              The Company’s recreational vehicles products are sold by five sales personnel, working exclusively for the Company, to major manufacturers of recreational vehicles such as Fleetwood Enterprises, Forest River and Thor Industries.

              The Company’s RV Segment operations compete on the basis of price, customer service, product quality, and reliability. Although definitive information is not readily available, the Company believes that its market share for most of its recreational vehicle window and door products exceeds 50%. The Company’s recreational vehicles chassis and chassis parts operations compete with several other manufacturers of chassis and chassis parts, as well as with certain manufacturers of recreational vehicles that produce their own chassis and chassis parts. The Company’s operation as a supplier of chassis and chassis parts for recreational vehicles initially had only a small market share in 1997, but the Company’s market share has been increasing substantially. Although definitive information is not readily available, the Company believes that its market share for chassis and chassis parts for recreational vehicles exceeds 60%.

              Sales of the Company’s slide-out mechanisms and related power units have grown from virtually zero in 2001 to sales in excess of $37 million during 2003. The Company competes with several other manufacturers of slide-out mechanisms. Although definitive information is not readily available, the Company believes that its market share for slide-out mechanisms for travel trailers and fifth wheel RVs exceeds 60%. The Company manufactures and sells certain of its slide-out mechanisms pursuant to a non-exclusive license granted by the exclusive licensee and owner of three patents until October 24, 2017, the date of the last to expire of the patents. Royalties are payable by the Company on an annual declining percentage of sales of slide-out mechanisms produced by the Company with annual minimum royalties $1,250,000 for the years 2003 through 2006. Aggregate royalties for the period from 2007 through the expiration of the patents will not exceed $5 million. See Item 3. “Legal Proceedings” for a description of the settlement of litigation involving the Company’s slide-out mechanisms.

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Manufactured Housing Products Segment

              The Company’s subsidiaries in the MH Segment manufacture and market a number of components for manufactured homes, including vinyl and aluminum windows and screens, thermo-formed bath and shower units, steel chassis and steel chassis parts. In 2003, the MH Segment represented approximately 38% of the Company’s consolidated sales, and 37% of consolidated segment operating profit. The MH Segment also supplies related products to other industries, representing less than 5% of sales of this segment.

              Raw materials used by the Company’s MH Segment, consisting of fabricated steel (coil, sheet, galvanized and I-beam), extruded aluminum and vinyl, glass, ABS resin, and various adhesive and insulating components, are available from a number of sources.

              Operations of the Company’s MH Segment consist primarily of fabricating, welding, thermo-forming, painting and assembling components into finished products. The Company’s MH Segment operations are conducted at 23 manufacturing and warehouse facilities throughout the United States, strategically located in proximity to the customers they serve. Of these facilities, eight also conduct operations in the Company’s RV Segment. See Item 2. “Properties.”

              The Company’s manufactured housing products are sold by 14 sales personnel, working exclusively for the Company, to major builders of manufactured homes such as Cavalier Homes, Champion Enterprises, Clayton Homes, Fleetwood Enterprises, Oakwood Homes, and Skyline. In November 2002, Oakwood Homes filed for relief under Chapter 11 of the United States Bankruptcy Code. During 2003, Clayton Homes was acquired by Berkshire Hathaway Inc.. Thereafter, Berkshire Hathaway Inc. made an offer to acquire Oakwood Homes.

              The Company’s MH Segment competes on the basis of price, customer service, product quality, and reliability. Although definitive information is not readily available, the Company believes that the two leading suppliers of windows for manufactured homes are the Company and Philips Industries, a subsidiary of Tomkins, PLC, and that the Company’s market share for windows and screens is more than 50%. The Company’s manufactured homes chassis and chassis parts operations compete with several other manufacturers of chassis and chassis parts, as well as with certain builders of manufactured homes which produce their own chassis and chassis parts. The Company’s thermo-formed bath unit operation competes with three other manufacturers of bath units. Although definitive information is not readily available, the Company believes that its market share for chassis and chassis parts for manufactured homes is approximately 8% percent, and that its share of the total market for bath units is approximately 35%.

Discontinued Operation

              The market for refurbished axles and tires is highly fragmented, has low entry barriers, and is therefore highly competitive. Drew’s axle and tire refurbishing operation did not perform well from 2000 through 2002 primarily due to increased competition and the decline in the manufactured housing industry, which severely affected operating margins. During 2001, the axle and tire refurbishing operation closed two of its five factories and sold the operations of a third factory. In September 2002, the Company converted one of its two remaining axle and tire refurbishing facilities to an RV window production facility, and in January 2003, the Company sold its one remaining axle and tire refurbishing operation at a small gain. The Company no longer sells refurbished tires and axles. As a result, the axle and tire refurbishing business of LTA is classified as a discontinued operation in the Consolidated Financial Statements.

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Regulatory Matters

              Windows produced by the Company for manufactured homes must comply with performance and construction regulations promulgated by the United States Housing and Urban Development Authority (“HUD”) and by the American Architectural Manufacturers Association relating to air and water infiltration, thermal performance, emergency exit conformance, and hurricane resistance. Thermo-formed bath and shower units manufactured by the Company for manufactured homes must comply with performance and construction regulations promulgated by HUD, the American National Standards Institute, the American Society for Testing and Materials, and Underwriters Laboratory relating to fire resistance, electrical safety, color fastness, and stain resistance.

              Windows and doors produced by the Company for the recreational vehicle industry are regulated by The United States Department of Transportation Federal Highway Administration (“DOT”), National Fire and Protection Agency, and the National Electric Code governing safety glass performance, egressability, door hinge and lock systems, egress window retention hardware, and baggage door ventilation.

              Manufactured homes are built on steel chassis which are fitted with axles and tires sufficient in number to support the weight of the home, and are transported by producers to dealers via roadway. The Company sells a small number of new tires and axles. New tires distributed by the Company are subject to regulations promulgated by DOT and by HUD relating to weight tolerance, maximum speed, size, and components.

              The Company’s operations are also subject to certain federal, state and local regulatory requirements relating to the use, storage, discharge and disposal of hazardous chemicals used during their manufacturing processes.

              The Company believes that it is currently operating in compliance with applicable laws and regulations, and does not believe that the expense of compliance with these laws and regulations, as currently in effect, will have a material effect on the Company’s capital expenditures, earnings or competitive position.

Employees

              The number of persons employed full-time by the Company and its subsidiaries at December 31, 2003 was approximately 2,900. The Company and its subsidiaries believe that relations with its employees are good.

Item 2. PROPERTIES.

              The Company’s manufacturing operations are conducted at facilities that are used for both manufacturing and warehousing. In addition, the Company maintains administrative facilities used for corporate and administrative functions. The following is a chart identifying the Company’s properties:

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              The Company owns a 33,500 square feet building in McAdoo, Pennsylvania and a 43,000 square feet building in Waco, Texas that are leased to third parties, and owns a 21,600 square feet building in Garrett, Indiana which is vacant.

Item 3. LEGAL PROCEEDINGS.

              During 2003, Lippert was a defendant in two related actions entitled Versa Technologies, Inc., VT Holding II, Inc. and Engineered Solutions, LP vs. Lippert Components, Inc., commenced in the United States District Court, Eastern District of Wisconsin, on June 11, 2002, and Versa Technologies, Inc. dba Power Gear and Actuant Corporation vs. Lippert Components Manufacturing Inc., David Beard, William Pfifer and DOES 1 through 100, inclusive, commenced in the Superior Court of the State of California, County of Riverside, on December 31, 2002.

              In the first action, Plaintiffs alleged that Lippert infringed certain United States patents owned by plaintiffs in connection with Lippert’s manufacture and sale of operating mechanisms for recreational vehicle slide-out mechanisms. Plaintiffs also alleged that Lippert breached a confidentiality agreement between Lippert and plaintiffs’ alleged predecessor-in-interest by using allegedly confidential information of such predecessor-in-interest, and by hiring plaintiffs’ employees. Plaintiffs sought damages in an unspecified amount, treble damages, a permanent injunction restraining Lippert from infringing plaintiffs’ patents and from breaching the confidentiality agreement, and costs and attorney’s fees incurred in the action.

              In the second action, Plaintiffs alleged that Lippert hired former employees of plaintiff Power Gear for the purpose of depriving Power Gear of its West Coast sales force and for the purpose of accessing confidential business information relating to Power Gear’s business and operations. Plaintiffs alleged intentional interference with contract, intentional interference with prospective economic advantage, common law unfair competition, and unfair business practices, in violation of the California Business and Professions Code (Section (17000 et. seq.). Plaintiffs sought damages in an unspecified amount, exemplary damages, restitution of unjust enrichment in an unspecified amount, and costs and expenses incurred in the proceeding and injunctive relief.

              On February 28, 2003, both actions were terminated and dismissed in accordance with a settlement agreement providing for a non-exclusive license in favor of Lippert for the life of the slide-out mechanism patents. Royalties will be payable by Lippert on an annual declining percentage of sales of slide-out mechanisms produced by Lippert, with an annual minimum royalty of $1,000,000 for fiscal 2002 and annual minimum royalties of $1,250,000 for fiscal years 2003 through 2006. Aggregate royalties from 2007 through the expiration of the patents will not exceed $5 million. See Item 1. “Business” for a discussion of sales of the Company’s slide-out mechanisms.

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              Lippert is a defendant in an action entitled SteelCo, Inc. vs. Lippert Components, Inc. and DOES 1 through 20, inclusive commenced in the Superior Court of the State of California, County of San Bernardino, San Bernardino District, on July 16, 2002.

              Plaintiff alleges that Lippert violated certain provisions of the California Business and Professions Code (Sec. 17000 et. seq.) by allegedly selling chassis and component parts below Lippert’s costs, engaging in acts intended to destroy competition, wrongfully interfering with plaintiff’s economic advantage, and engaging in unfair competition. Plaintiff seeks damages in an unspecified amount, treble damages, punitive damages, costs and expenses incurred in the proceeding and injunctive relief.

              Lippert is vigorously defending against the allegations in the complaint, and has asserted counterclaims against Plaintiff. The case is in discovery.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

              None.

              DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

              The following tables set forth certain information with respect to the Directors and Executive Officers of the Company as of December 31, 2003.

              LEIGH J. ABRAMS, since April 2001, has also been a director of Impac Mortgage Holdings, Inc., a publicly-owned specialty finance company organized as a real estate investment trust.

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              EDWARD W. ROSE, III, for more than the past five years, has been President and sole stockholder of Cardinal Investment Company, Inc., an investment firm. Mr. Rose also serves as a director of the following public companies: Liberte Investors, Inc., engaged in real estate loans and investments; and ACE Cash Express, Inc., engaged in check cashing services.

              DAVID L. WEBSTER, since November 1980, has been President and Chief Executive Officer of Kinro, Inc., a subsidiary of the Company, and since November 1984, has been Chairman of Kinro, Inc.

              L. DOUGLAS LIPPERT, from October 1997 until February 2003, was Chairman, President and Chief Executive Officer of Lippert Components, Inc., a subsidiary of the Company, and President of the predecessor of Lippert Components, Inc. since 1978. Effective February 5, 2003, Jason D. Lippert, the son of L. Douglas Lippert, was appointed as President and Chief Executive Officer of Lippert Components, Inc., and L. Douglas Lippert continues as Chairman.

              JAMES F. GERO, since March 1992, has been Chairman and Chief Executive Officer of Sierra Technologies, Inc., a manufacturer of defense systems technologies, and a director of its affiliates. Mr. Gero also serves as a director of Orthofix International, N.V., a publicly-owned international supplier of orthopedic devices for bone fixation and stimulation, and as a director of Intrusion.com, Inc., a publicly-owned supplier of security software.

              GENE H. BISHOP, from March 1975 until July 1990, was Chief Executive Officer of MCorp, a bank holding company, and from October 1990 to November 1991, was Vice Chairman and Chief Financial Officer of Lomas Financial Corporation, a financial services company. From November 1991 until his retirement in October 1994, Mr. Bishop served as Chairman and Chief Executive Officer of Life Partners Group, Inc., a life insurance holding company. Mr. Bishop also serves as a director of Liberte Investors, Inc., engaged in real estate loans and investments.

              FREDERICK B. HEGI, JR., is a founding partner of Wingate Partners, including the indirect general partner of each of Wingate Partners L.P. and Wingate Partners II, L.P. Since May 1982, Mr. Hegi has served as President of Valley View Capital Corporation, a private investment firm. He is a director of the following publicly-owned companies: Lone Star Technologies, Inc., a diversified company engaged in the manufacture of tubular products; Texas Capital Bancshares, Inc., a regional and Internet bank; and is Chairman of the Board of United Stationers, Inc., a wholesale distributor of business products. Mr. Hegi was also Chairman, President and Chief Executive Officer of Kevco, Inc., a publicly-owned distributor of building products to the manufactured housing and recreational vehicle industries, which filed for protection under Chapter 11 of the United States Bankruptcy Code on February 5, 2001, later converted to a Chapter 7 liquidation.

              DAVID A. REED, is Managing Partner of Causeway Capital Partners, L.P., a privately-owned investment partnership. Mr. Reed retired as Senior Vice Chair for Ernst & Young LLP in 2000 where he held several senior U.S. and global operating, administrative and marketing roles in his 26-year tenure with the firm. He served on Ernst and Young LLP’s Management Committee and Global Executive Council from 1991-2000. Mr. Reed also serves as a director of Texas Industries, a publicly-owned company that supplies construction materials.

Other Executive Officers

              FREDRIC M. ZINN, not a nominee for election as a director, has been Chief Financial Officer of the Company for more than the past five years, and Executive Vice President of the Company since February 2001. Mr. Zinn is a Certified Public Accountant.

              JASON D. LIPPERT, not a nominee for election as a director, has been President and Chief Executive Officer of Lippert Components, Inc., a subsidiary of the Company, since February 5, 2003. From May 2000, Mr. Lippert was Executive Vice President and Chief Operating Officer of Lippert Components, Inc., and from 1998 until 2000, Mr. Lippert served as Regional Director of Operations of Lippert Components, Inc.

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              JOHN F. CUPAK, not a nominee for election as a director, has been Secretary as well as Director of Taxation and Internal Audit of the Company since May 2003. For more than the five years prior thereto, Mr. Cupak was Controller of the Company.

              JOSEPH S. GIORDANO III, not a nominee for election as a director, has been Corporate Controller and Treasurer of the Company since May 2003. From July 1998 to August 2002, Mr. Giordano was a Senior Manager at KPMG LLP, and from August 2002 to April 2003, Mr. Giordano was a Senior Manager at Deloitte & Touche LLP. Mr. Giordano is a Certified Public Accountant.

Compliance with Section 16(a) of the Securities Exchange Act

              Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s executive officers and directors, and persons who beneficially own more than ten percent of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”) and the New York Stock Exchange. Officers, directors and greater than ten-percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

              Based on its review of the copies of such forms received by it, the Company believes that during 2003 all such filing requirements applicable to its officers and directors (the Company not being aware of any ten percent holder during 2003 other than Edward W. Rose III and L. Douglas Lippert, directors of the Company) were complied with.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

              As of February 27, 2004, there were approximately 733holders of Drew Common Stock, not including beneficial owners of shares held in broker and nominee names.

              On December 11, 2003, the Company’s Common Stock began trading on the New York Stock Exchange under the symbol “DW”. Prior thereto, the Company’s Common stock was traded on the American Stock Exchange.

              Information concerning the high and low closing prices of the Company’s Common Stock for each quarter during 2003 and 2002 is set forth in Note 12 of Notes to Consolidated Financial Statements in Item 8 of this Report.

Dividend Information

              The Company has not paid any cash dividends on its Common Stock. Future dividend policy with respect to the Common Stock will be determined by the Board of Directors of the Company in light of prevailing financial needs and earnings of the Company and other relevant factors.

              The Company’s dividend policy is subject to certain restrictions contained in its 6.95% Senior Notes and in other financing agreements.

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Item 6. SELECTED FINANCIAL DATA

              The following table summarizes certain selected historical financial and operating information of the Company and is derived from the Company’s Consolidated Financial Statements. Such historical financial data may not be indicative of the Company’s future performance. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical Consolidated Financial Statements and Notes thereto included in Item 7 and Item 8 of this Report, respectively.

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

              This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s historical Consolidated Financial Statements and Notes thereto included in Item 8 of this Report.

              The Company has two reportable operating segments, the recreational vehicle products segment (the “RV segment”) and the manufactured housing products segment (the “MH segment”). The RV segment, which accounted for 62 percent of consolidated net sales for 2003 and 53 percent of consolidated net sales for 2002, manufactures a variety of products used in the production of recreational vehicles, including windows, doors, chassis, chassis parts, RV slide-out mechanisms and related power units, and electric stabilizer jacks. The MH segment, which accounted for 38 percent of consolidated net sales for 2003 and 47 percent of consolidated net sales in 2002, manufactures a variety of components used in the construction of manufactured homes, and to a lesser extent, modular housing and office units, including vinyl and aluminum windows and screens, chassis, chassis parts and thermo-formed bath and shower units.

              This shift in sales between segments resulted partly from the growth in the RV industry and the decline in the MH industry. Intersegment sales and sales to industries other than manufacturers of RVs and manufactured homes are insignificant.

              The Company’s operations are conducted through its operating subsidiaries. Its two primary operating subsidiaries, Kinro, Inc. (“Kinro”) and Lippert Components, Inc. (“LCI”), have operations in both the MH and RV segments. At December 31, 2003, the Company’s subsidiaries operated 41 plants in 17 states and one in Canada.

INDUSTRY BACKGROUND

Recreational Vehicle Industry

              The Recreational Vehicle Industry Association (“RVIA”) reported a three percent increase in total industry shipments of recreational vehicles (“RVs”) in 2003, while industry shipments of travel trailers and fifth wheel RVs only, the Company’s primary market, increased nine percent for 2003. The 2003 growth builds upon 2002, when the RVIA reported an increase of 21 percent in total RV shipments to near record levels and an increase of 25 percent for travel trailers and fifth wheel RVs for the year. Increasing industry RV sales are expected to continue to be driven by positive demographics, as demand for RVs is strongest from the over 50 age group, which is the fastest growing segment of the population. Industry growth also continues to be bolstered by the preference for domestic vacations, rather than foreign travel, and low interest rates. In recent years, the RVIA has employed an advertising campaign to attract customers in the 35 to 54 age group, and the number of RV’s owned by those 35 to 54 grew faster than all other age groups.

Manufactured Housing Industry

              As a result of limited credit availability for purchases of manufactured homes, high interest rate spreads between conventional mortgages on site built homes and chattel loans for manufactured homes, and unusually high repossessions of manufactured homes, industry production has declined approximately 65 percent since 1998 to 131,000 homes in 2003, the lowest production level in 40 years. However, based upon industry reports, retail sales of manufactured homes have declined much less severely to an estimated 250,000 homes in 2003. However, almost 50 percent of these retail sales have been filled by inventory reductions by dealers and manufacturers, and the resale of repossessed homes, rather than new production. It has been estimated that approximately 90,000 manufactured homes per year were repossessed in 2000 to 2002, with estimates of 100,000 or more homes repossessed in 2003, far in excess of historical repossession levels.

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              Repossessions and the limited availability of chattel loans for home buyers have been continuing concerns for the manufactured housing industry. However, recently there have been some signs that repossessions are beginning to ease and the retail inventory of new and repossessed homes per retail dealer location has declined from December 2002 levels. The availability of financing for manufactured homes is expected to increase in 2004 as a result of Fannie Mae’s announcement in February 2004 that they were easing their financing requirements for manufactured homes. In addition, Berkshire Hathaway Inc. acquired Clayton Homes in August 2003, and Clayton has since received substantial funds to provide financing for manufactured homes. Long-term prospects for manufactured housing are still favorable because it provides quality, affordable housing which the country needs.

              As a result of market share gains and efficiency improvements, Drew’s MH segment has remained profitable throughout this extended industry-wide slump. Based upon the Company’s current sales content per manufactured home, the Company has estimated that for every 10,000 new manufactured homes produced, the Company’s net sales should increase approximately $10 million, and the operating profit on the incremental sales should be higher than current segment operating margins.

Steel Prices

              In mid December 2003 and continuing into 2004, the Company was notified by its steel suppliers of unprecedented steel cost increases, which through February 2004 have aggregated more than 60 percent. Steel is one of the Company’s primary raw materials. This situation apparently arose as the result of an increase in world-wide steel demand, particularly in China. In addition, due to the weakened value of the United States dollar, which has declined about 15 percent versus the Euro over the last year, and the increased cost of oceanic shipping, it has become uneconomical to import steel.

              In response to the steel cost increases, the Company took the following immediate actions: a) contacted other steel vendors, both domestic and foreign, in an attempt to obtain better pricing, but to no avail; b) ordered as much steel as possible in December 2003, and January and February 2004, before the monthly cost increases became effective in each month; c) raised prices to customers, which was followed with a second round of price increases; and d) cut operating costs wherever possible. These actions were taken quickly and as a result, the steel cost increases to date are not expected to have a significant effect on 2004 results.

RESULTS OF OPERATIONS

              Net sales and operating profit are as follows (in thousands):

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              Net sales and operating profit by segment, as a percent of the total, are as follows:

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Consolidated Highlights

RV Segment

              Net sales of the RV segment increased $48.4 million (28 percent) from 2002, largely due to increases in the Company’s market share of all its primary RV product lines, including RV slide-out mechanisms and related power units, chassis, and windows and doors. Sales of RV slide-out mechanisms and related power units doubled from 2002, to approximately $37 million. The growth of this segment also resulted from the industry-wide growth in RV shipments, in particular the Company’s primary market of travel trailers and fifth wheel RVs, as well as the continued trend towards using more slide-out mechanisms in travel trailers and fifth wheel RVs. Long-term growth in industry-wide RV sales may result from demographic trends, as demand for RVs is strongest from the over 50 age population, which is the fastest growing segment of the population, although RV sales may be subject to periodic swings. There were no significant changes in sales prices by the Company’s RV segment in 2003.

              The acquisitions of LTM and ET&T, completed in 2003, added only approximately $4 million in sales in 2003, but have substantial growth potential to exceed their combined pre-acquisition annual historical sales of approximately $11.5 million. Recently, the Company’s research and development departments designed and developed new products such as leveling systems and slide out mechanisms for motor homes, and bath and shower units for RVs. The Company plans to aggressively market these products in 2004. For 2003, the Company only had minimal sales to the motor home segment of the RV industry.

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              Operating profit of the RV segment increased $8.6 million (53 percent) in 2003 over 2002. This growth is attributable to both an increase in unit sales and an increase in the segment’s operating profit margin. Operating profit margin increased to 11.3 percent for 2003 from 9.4 percent in 2002 primarily because of (i) the spreading of fixed costs over higher sales; (ii) greater purchasing leverage for certain components; (iii) improved operating efficiencies; and (iv) temporarily moderate steel costs during the middle of 2003. The Company was notified by its steel suppliers of unprecedented steel cost increases which began in late 2003 and accelerated in 2004, and have now aggregated more than 60 percent as described in “Industry Background” above. Partially offsetting these increases in operating profit margin were legal and other costs related to the settlement of patent litigation on the Company’s slide-out mechanisms in February 2003 and higher health and workers compensation insurance costs.

MH Segment

              Net sales of the MH segment declined $20.7 million (13 percent) in 2003, which was less of a decline than that experienced by the industry as a whole. The Company has captured market share and increased sales of products for modular homes and office units partially offsetting the sales reduction caused by the decline in industry shipments. There were no significant changes in sales prices by the Company’s MH segment during 2003.

              Operating profit of the MH segment decreased $2.5 million (15 percent) in 2003 largely because of the decline in sales. This segment’s operating profit margin was 10.7 percent of sales in 2003, which was slightly lower than the 11.0 percent achieved for 2002, primarily because of higher health and workers compensation insurance costs and the negative impact of lower volume on fixed costs, partially offset by temporarily moderate steel costs during the middle of 2003. The Company was notified by its steel suppliers of unprecedented steel cost increases which began in late 2003 and accelerated in 2004, and have now aggregated more than 60 percent as described in “Industry Background” above. Selling, general and administrative expenses for 2003 were down in dollar terms following the trend of sales.

              As of November 30, 2003, the Company evaluated the fair value of the goodwill associated with the MH segment, which had a book value of $3.2 million, and determined that no impairment had occurred. The Company will continue to monitor such goodwill in light of conditions in the MH industry.

Corporate and Other

              Corporate and other expenses increased $975,000, primarily as a result of higher Directors and Officers insurance costs ($101,000), incentive compensation due to increased profits ($151,000), stock option expense resulting from the adoption of SFAS 123 ($120,000), expenses associated with the listing of the Company’s stock on the New York Stock Exchange ($203,000) and expenses related to corporate governance due to the implementation of the Sarbanes-Oxley requirements ($225,000).

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

RV Segment

              The RV segment achieved a 59 percent net sales increase in 2002, as a result of industry growth and a significant increase in the market share of both its RV chassis and its RV window and door product lines. In addition, the introduction of slide-out mechanisms and related components to the RV chassis product line was a major contribution to the segment’s sales increase, accounting for sales of approximately 10 percent of segment net sales. The sales gains of the RV segment far exceeded the 21 percent increase in industry-wide shipments of RV’s in 2002.

              In August 2002, the Company acquired the business and certain assets of the RV chassis division of Elkhart, Indiana-based Quality Frames, Inc., with chassis sales of approximately $7 million. Production of these chassis was moved to the Company’s existing manufacturing facilities. In addition, the Company is also selling other products to these new customers.

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              Operating profit of the RV segment increased $7.0 million (76 percent) in 2002 over 2001. This increase is primarily attributable to the increase in sales. The segment’s profit margin increased to 9.4 percent for 2002 from 8.6 percent for 2001, primarily because of the effect of fixed costs and higher sales as well as improved operating efficiencies of this fast growing segment, which more than offset the effect of the higher steel costs experienced in the second half of 2002. There were no significant selling price increases in 2001 and 2002.

MH Segment

              Net sales of the MH segment increased 5 percent in 2002, despite the 13 percent decline in industry-wide production of manufactured homes. Excluding sales of the Better Bath operation, acquired in June 2001, sales of this segment increased 1 percent in 2002. The Company outperformed the industry primarily because of market share gains from sales of its high-end vinyl window products. In early October 2002, the Company expanded its capacity in order to accommodate the increased demand for these vinyl window products.

              The operating profit margin of the MH segment increased slightly to 11.0 percent in 2002 from 10.8 percent in 2001. The 2002 results were enhanced by the improved operating profit margin achieved by Better Bath, partially as a result of reduced product costs, and lower selling, general and administrative costs. This improvement in operating profit margins by Better Bath, was partially offset by substantial increases in certain steel costs, primarily as a result of new import tariffs. Steel costs in early 2003 remain significantly higher than during the comparable period in 2002. The Company has had some success in passing a portion of these increases on to its customers. Also, labor costs increased on the Company’s fast growing vinyl window product line as a result of capacity constraints, which have been alleviated by the addition of a new production line in Alabama, opened in October 2002. Higher sales caused selling, general and administrative expenses to increase, but such costs were stable as a percentage of sales. Included in selling, general and administrative costs in 2002 is a charge of $0.5 million relating to the chapter 11 filing of Oakwood Homes. As of December 31, 2002, the Company had fully reserved the $0.8 million pre-bankruptcy receivable from this customer. The Company continues to sell to Oakwood Homes pursuant to authorization of the Bankruptcy Court.

Amortization of Intangibles

              Amortization of intangibles decreased $1,845,000 in 2002 from 2001, primarily as a result of the Company’s adoption of Statement of Financial Accounting Standards No. 142, which requires that goodwill and intangible assets with indefinite lives no longer be amortized, but rather be tested for impairment at least annually.

              The following schedule shows pro forma income for the year ended December 31, 2001, excluding goodwill amortization expense (in thousands, except per share data):

Corporate and Other

              Corporate and other expenses for the year 2002, were $891,000 higher than last year, as a result of increases in incentive compensation based upon higher profits, higher professional fees for special projects, a new investor relations program, and increased insurance and benefit costs.

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Cumulative Effect of Change in Accounting Principle for Goodwill

              During the first quarter of 2002, in accordance with the goodwill impairment provisions of SFAS No. 142, the Company identified its reporting units and allocated its assets and liabilities, including goodwill, to its reporting units. In addition, the Company had a valuation of certain of its reporting units done by an independent appraiser, as of January 1, 2002, to assist the Company in determining if there had been an impairment in the goodwill of any of such reporting units. Based on this appraisal and additional analyses performed by the Company, it was determined that there had been an impairment of goodwill in two reporting units. As a result, the Company recorded an impairment charge of $32,905,000 offset by a tax benefit of $2,743,000. Such charge has been recorded as a cumulative effect of change in accounting principle.

              A substantial portion of the impairment charge related to the 1997 acquisition of LCI. At the time of that acquisition, LCI was primarily involved in the MH segment, and was just beginning its RV products business. Since that time the MH industry has declined substantially causing a reduction in LCI’s MH sales and profits. During the same period, LCI’s RV business has grown very substantially in both sales and profits.

              As of November 30, 2002, the Company reevaluated the fair value of the remaining goodwill, which had a book value of $7.0 million, and determined that no additional impairment had occurred.

Interest Expense, Net

              Interest expense, net decreased $0.5 million to $3.0 million in 2003, as a result of reductions in debt levels, and to a lesser extent, savings resulting from interest rate reductions. The interest expense for 2003 also includes $228,000 related to imputed interest on the liability recorded for minimum royalty payments for fiscal years 2003 through 2006. Interest expense, net decreased $0.6 million to $3.6 million in 2002, as a result of reductions in debt levels.

Provision for Income Taxes

              The effective tax rate for 2003 was approximately 38.0%, compared to 38.5% in 2002 and 39.3% in 2001. The decline in the effective tax rate is due to a change in the composition of pretax income for state tax purposes.

Discontinued Operations

              The axle and tire refurbishing business of LTA did not perform well from 2000 through 2002, primarily due to increased competition and the decline in the manufactured housing industry, which severely affected operating margins. In January 2001, the axle and tire refurbishing business closed two of its five factories and in July 2001, a third such operation was sold. In September 2002, the Company converted one of its two remaining axle and tire refurbishing facilities to an RV window production facility. The last axle and tire refurbishing operation was sold in January 2003 at a small gain. As a result, the axle and tire refurbishing business of LTA is classified as discontinued operations in the Consolidated Financial Statements pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” adopted by the Company effective January 1, 2002.

              LTA continues to own a factory in Texas which was previously utilized in its axle and tire refurbishing business. This factory is being leased to the purchaser of LTA’s Texas operation. Since it is not probable that this factory will be sold within one year, it is not considered as held for sale under SFAS No.144, and is not included in discontinued operations in the Consolidated Financial Statements.

              The proceeds from the disposition of all other significant assets of LTA’s axle and tire refurbishing business, consisting primarily of inventory and accounts receivable, were collected in January 2003 and resulted in a small gain.

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              The discontinued axle and tire refurbishing business had previously been included in the Company’s MH segment, and had revenues of $11.2 million and $14.7 million, in 2002 and 2001, respectively.

Recently Adopted and New Accounting Standards

              As of April 1, 2002, the Company adopted the fair value method of accounting for stock options contained in SFAS No. 123,”Accounting for Stock-Based Compensation,” which is considered the preferable method of accounting for stock-based employee compensation. During the transition period, the Company will be utilizing the prospective method under SFAS No. 148 “Accounting for Stock-Based Compensation — Transition and Disclosures.” All employee stock options granted after January 1, 2002 have been expensed over the stock option vesting period based on fair value, determined using the Black-Scholes option-pricing method, at the date the options were granted. This resulted in a $197,000 and $10,000 charge to operations for the years ended December 31, 2003 and 2002, respectively, relating to options for 396,500 and 20,000 shares granted in the fourth quarter of 2003 and 2002, respectively. Historically, the Company had applied the “disclosure only” option of SFAS No. 123. Accordingly, no compensation cost has been recognized for stock options granted prior to January 1, 2002. Had the Company previously adopted this new accounting policy, diluted earnings per share would have been reduced by $.02 for 2003, $.04 for 2002 and $.04 for 2001.

              In August 2001, the FASB issued SFAS No.143, “Accounting for Asset Retirement Obligations.” SFAS No.143 requires companies to record a liability for asset retirement obligations associated with the retirement of long-lived assets. Such liabilities should be recorded at fair value in the period in which a legal obligation is created, which typically would be upon acquisition or completion of construction. The provisions of SFAS No. 143 are effective for fiscal years beginning after June 15, 2002. Accordingly, the Company adopted the provisions of SFAS No. 143 effective January 1, 2003. The implementation of SFAS No. 143 did not have a material impact on the earnings or the financial position of the Company.

              In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires the guarantor to recognize a liability for the non-contingent component of a guarantee; that is, the obligation to stand ready to perform in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at its inception. The recognition of the liability is required even if it is not probable that payments will be required under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements. FIN 45 also requires additional disclosures related to guarantees. The recognition measurement provisions of FIN 45 are effective for all guarantees entered into or modified after December 31, 2002. FIN 45 also requires additional disclosures related to guarantees in interim and annual financial statements. Accordingly, the Company adopted the provisions of FIN 45, effective January 1, 2003. The implementation of FIN 45 did not have an impact on the earnings or the financial position of the Company.

LIQUIDITY AND CAPITAL RESOURCES

              The Statements of Cash Flows reflect the following (in thousands):

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Cash Flows from Operations

              Net cash flows from operating activities increased approximately $19.3 million in 2003, as a result of a $3.6 million increase in income from continuing operations, as well as:

              Net cash flows from operating activities declined approximately $16.0 million in 2002, despite the $6.6 million increase in income before the cumulative effect of change in accounting principle for goodwill. The lower net cash flows from operating activities in the current year is primarily attributable to:

Cash Flows from Investing Activities

              Cash flows used for investing activities of $12.4 million in 2003 consists of capital expenditures ($5.1 million) and the acquisitions of LTM and ET&T for a combined $7.4 million. The capital expenditures and acquisitions in 2003 were funded with the Company’s available cash. Cash flows used for investing activities for 2002 of $12.0 million include capital expenditures of $10.5 million as well as $2.1 million for acquisitions. Capital expenditures and the acquisition in 2002 were funded by cash flow from operations and a new $2.8 million Industrial Development Bond, which partially financed the construction of a larger factory and related equipment to replace a leased facility to provide additional capacity for the Company’s vinyl window line. Capital expenditures for 2004 are anticipated to be approximately $14 million and are expected to be funded by cash flows from operations. The budgeted capital expenditures for 2004 include expanding glass tempering capacity, adding a powder coat paint line, building a new facility to replace a leased facility and certain projects which were deferred from 2003.

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              On July 17, 2003, the Company acquired Kansas-based LTM, with annual sales of approximately $4.5 million. LTM manufactures a variety of products for RVs, including slide-out mechanisms and specialty slide-out trays for batteries, LP tanks and storage, as well as electric stabilizer jacks, flexguard slide-out wire protection systems, and slide-out patio decks. The purchase price was $4.1 million, including $250,000 of LTM’s debt which the Company repaid on closing. The purchase price was funded with $3.8 million of Drew’s available cash and a $350,000 note to the seller, bearing interest at the prime rate, payable in equal installments over the next five years.

              On October 3, 2003, the Company acquired certain assets and liabilities of Indiana-based ET&T Frames, Inc. (“ET&T”), with annual sales of approximately $7 million. ET&T manufactures chassis primarily for specialty trailer units, consisting of park models, office units, cargo trailers and, to a lesser extent chassis for towable recreational vehicles. This acquisition represents an expansion of Drew’s chassis manufacturing business into specialty chassis. The $3.6 million purchase price included the accounts receivable and certain inventory and fixed assets of ET&T. Production of ET&T’s products was immediately transferred to the Company’s existing factories, without adding any overhead. The purchase price was funded with Drew’s available cash.

Cash Flows from Financing Activities

              Cash flows used for financing activities for 2003 include a net decrease in debt of $14.4 million, partially funded by $3.7 million received from the exercise of employee stock options. Cash flows used for financing activities for 2002 include a net decrease in debt of $4.5 million partially funded by $3.3 million received from the exercise of employee stock options.

              Availability under the Company’s line of credit was $27.1 million at December 31, 2003, net of $2.9 million in letters of credit. Such availability, along with anticipated cash flows from operations, is adequate to finance the Company’s working capital and anticipated capital expenditure requirements. The Company is in compliance with all of its debt covenants and expects to remain in compliance for the next twelve months. Certain of the Company’s loan agreements contain prepayment penalties.

              At December 31, 2003, the Company had outstanding $16 million of 6.95 percent, seven year Senior Notes. The notes originally aggregated $40 million, and repayment of these notes is $8 million annually, of which the first three payments were made annually since January 2001. A fourth scheduled payment of $8 million was made in January 2004.

              Future minimum commitments relating to the Company’s contractual obligations at December 31, 2003 are as follows (in thousands):

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SUBSEQUENT EVENT

              In February 2004, the Company sold certain intellectual property rights relating to a process used to manufacture a new composite material. Simultaneously with the sale, the Company entered into an equipment lease and a license agreement with the buyer. As a result, the Company plans to use the new composite material to produce certain bath products for the manufactured housing, modular housing, and recreational vehicle industries on an exclusive, royalty-free basis. This new composite material will enable the Company to compete against fiberglass bath products in these industries. The Company will also have the right to use the new composite material on a royalty-free, non-exclusive basis to manufacture various other products for the manufactured housing, modular housing, and recreational vehicle industries. Sales of these new products, if any, are not expected to be significant in 2004

              The sale price for the intellectual property rights was $4.0 million, consisting of cash of $100,000 at closing and a note of $3.9 million, payable over five years. The note bears interest at increasing annual interest rates, and is secured by a lien on the intellectual property rights sold, a right of offset against the lease, and a guaranty. The note is convertible by the Company into an equity interest in any new venture that the buyer may form to promote this process. In February 2004, the Company received the first payment under the note for $400,000.

              Drew is evaluating the potential gain on sale, and currently anticipates that it will record a first quarter pre-tax gain of approximately $500,000 ($300,000, or $.03 per diluted share, after tax) after all related costs and valuations. Future gain, if any, will be recorded when any payments on the remaining $3.5 million balance of the note are received.

CORPORATE GOVERNANCE

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

              The Company received notification in November from Institutional Stockholders Services, Inc., (“ISS”) a Rockville, Maryland-based independent research firm that advises institutional investors, that Drew’s corporate governance policies outranked 99.9 percent of all companies listed in the Russell 3000 index. Drew has no business relationships with ISS.

CONTINGENCIES

              LCI is a defendant in an action entitled SteelCo, Inc. vs. Lippert Components, Inc. and DOES 1 through 20, inclusive commenced in the Superior Court of the State of California, County of San Bernardino, San Bernardino District on July 16, 2002.

              Plaintiff alleges that LCI violated certain provisions of the California Business and Professions Code (Sec. 17000 et. seq.) by allegedly selling chassis and component parts below LCI’s costs, engaging in acts intended to destroy competition, wrongfully interfering with plaintiff’s economic advantage, and engaging in unfair competition. Plaintiff seeks damages in an unspecified amount, treble damages, punitive damages, costs and expenses incurred in the proceeding and injunctive relief.

              LCI is vigorously defending against the allegations in the complaint, and has asserted counterclaims against Plaintiff. The case is in discovery.

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CRITICAL ACCOUNTING POLICIES

              The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which requires that certain estimates and assumptions be made that affect the amounts and disclosures reported in those financial statements and the related accompanying notes. Actual results could differ from these estimates and assumptions. The following critical accounting policies, some of which are impacted significantly by judgments, assumptions and estimates, affect the Company’s consolidated financial statements.

Inventories

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

Self Insurance

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

Income Taxes

              The Company’s effective tax rate is based on pre-tax income, statutory tax rates and tax planning strategies. Significant management judgment is required in determining the effective tax rate and in evaluating the Company’s tax position. The Company’s accompanying Consolidated Balance Sheets include certain deferred tax assets resulting from deductible temporary differences, which are expected to reduce future taxable income. These assets are based on management’s estimate of realizability based upon forecasted taxable income. Realizability of these assets is reassessed at the end of each reporting period based upon the Company’s forecast of future taxable income. Failure to achieve forecasted taxable income could affect the ultimate realization of certain deferred tax assets, and may result in the recording of a valuation reserve. For additional information, see Note 9 of Notes to Consolidated Financial Statements.

Impairment of Long-Lived Assets

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

Impairment of Goodwill and Other Intangible Assets

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

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Stock Options

              As of April 1, 2002, the Company adopted the fair value method of accounting for stock options contained in SFAS No. 123, “Accounting for Stock-Based Compensation,” which is considered the preferable method of accounting for stock options. As a result, the fair value of all employee stock options granted after January 1, 2002 is being charged against earnings over the period of time during which the options vest. To determine fair value, the Company uses a method known as the Black-Scholes option-pricing method. Fair value is determined as of the date the option is granted.

              The fair value of options granted before January 1, 2002 are not being charged against earnings since the Company is using the prospective method, as allowed under SFAS No. 148 “Accounting for Stock-Based Compensation — Transition and Disclosures.”

              In past years, the “disclosure only” option of SFAS No. 123 was used. Therefore, no compensation cost was charged against earnings for stock options granted before January 1, 2002.

              If the Company had charged compensation cost of options granted prior to January 1, 2002 to earnings, by using the prospective method under SFAS No. 148, net income (loss) would have been reduced to the pro forma amounts indicated below:

Other Estimates

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

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INFLATION

              The prices of raw materials, consisting primarily of steel, vinyl, aluminum, glass and ABS resin, are influenced by demand and other factors specific to these commodities rather than being directly affected by inflationary pressures. Prices of certain commodities have historically been volatile. The Company experienced modest increases in its labor costs in 2003 and 2002 related to inflation.

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

              The Company is exposed to market risk in the normal course of its operations due to its purchases of certain commodities and its financing activities. Certain raw materials, particularly steel, aluminum, vinyl, glass and ABS resins are subject to price volatility.

              The Company is exposed to changes in interest rates primarily as a result of its financing activities. At December 31, 2003, the Company had approximately $32.1 million of fixed rate debt. Assuming there is a decrease of 100 basis points in the interest rate for borrowings of a similar nature subsequent to December 31, 2003, which the Company becomes unable to capitalize on in the short-term as a result of the structure of its fixed rate financing, future cash flows would be approximately $321,000 lower per annum, than if the fixed rate financing could be obtained at current market prices.

              At December 31, 2003, the Company had no outstanding borrowings on its $30 million line of credit. At December 31, 2003, the Company had $2.7 million of variable rate debt. Assuming there is an increase of 100 basis points in the interest rate for borrowings under these variable rate loans subsequent to December 31, 2003, and outstanding borrowings of $2.7 million, future cash flows would be affected by $27,000 per annum.

              In addition, the Company is exposed to changes in interest rates as a result of temporary investments in money market funds, however, such investing activity is not material to the Company’s financial position, results of operations, or cash flow.

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

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Consolidated Statements of Income
(In thousands, except per share amounts)

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

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Consolidated Balance Sheets
(In thousands, except shares and per share amount)