10-K/A 1 y04143e10vkza.txt AMENDMENT TO FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K/A (see explanatory note below) AMENDMENT NO. 1 (Mark one) [ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ________________ Commission File Number 333-43335 AIRXCEL, INC. (Exact name of Registrant as specified in its charter) Delaware 48-1071795 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3050 North Saint Francis, Wichita, Kansas 67219 (Address of principal executive offices) (Zip Code) (316) 832-3400 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered None None Securities registered pursuant to Section 12(g) of the Act: None 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 [XX] NO [ ] Page 1 of 52 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 the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES [ ] NO [XX] State the aggregate market value: The Company does not have any publicly traded equity securities. APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 1,000 shares of Common Stock as of December 31, 2003 DOCUMENTS INCORPORATED BY REFERENCE The Airxcel, Inc. Form S-4 Registration Statement Under the Securities Act of 1933, portions of which are incorporated by reference into Part IV. EXPLANATORY NOTE The Company is filing this Amendment No. 1 to its Annual Report on Form 10-K for the for the fiscal year ended December 31, 2003 in order to update its disclosure regarding the Company's internal disclosure controls and procedures. Additionally, in connection with the filing of Amendment No. 1 and pursuant to SEC rules, the Company is including certain currently dated certifications. This information is provided solely to comply with the obligation contained in the indenture agreement governing the Company's Senior Subordinated Notes. Page 2 of 52 PART I ITEM 1. BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS Airxcel, Inc. (the "Company") is a wholly-owned subsidiary of Airxcel Holdings Corporation ("Holdings"); formerly known as RV Holdings Corporation. Airxcel, Inc. was formed in May, 1991 as Recreation Vehicle Products, Inc. ("RVP"). In November, 1995, the Company acquired Carter Shades, Inc., which was merged with Faulkner Manufacturing. In October, 1997, the Company changed its name to Airxcel, Inc. and the Company's board of directors adopted a formal plan to dispose of the Faulkner Manufacturing division. On November 10, 1997, the Company completed the acquisition of Crispaire Corporation, currently operating as Marvair, a division of Airxcel, Inc. ("Marvair"), a designer, manufacturer and marketer of specialty wall mount air conditioners, environmental control units (ECUs) and heat pumps for various applications. On March 17, 1998, the Company completed the acquisition of 100% of the outstanding common stock of Suburban Manufacturing Company, formerly KODA Enterprises Group, Inc., ("Suburban"), a designer and manufacturer of heating, water heating and cooking appliances for the recreation vehicle ("RV") industry and other specialty products for the heating, ventilating and air conditioning industry. On November 3, 2000, the Company completed the acquisition of Instafreeze, Inc. ("Insta Freeze"), a designer and manufacturer of low-voltage compressor refrigerators for the RV industry and other applications utilizing compact compressor refrigerators. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company operates in the heating, ventilation, and air conditioning equipment industry. Due to the similarities of the economic characteristics, production processes, customers, distribution methods and regulatory environment of the Company's products, the Company is managed, operated and reported as one segment. Financial information about the Company's products and customers is presented in the consolidated financial statements. (c) NARRATIVE DESCRIPTION OF BUSINESS The Company is a designer, manufacturer and marketer of air conditioners, furnaces, water heaters, cooking appliances and low-voltage compressor refrigeration units for the recreation vehicle industry, and wall mount air conditioners, environmental control units ("ECUs"), heat pumps for the heating, ventilating and air conditioning industry and marine reverse cycle air conditioners. The Company supplies a variety of air conditioners to several of the world's largest RV original equipment manufacturers ("OEMs"), marketing these products under the popular and well-established "Coleman" brand name. The Company believes that its air conditioners are superior to those of its competitors due to greater air flow capacity, cooling efficiency and more aerodynamic design. Its reputation as a dependable source of high-quality, durable products has resulted in its long term relationships with leading RV manufacturers such as Page 3 of 52 Fleetwood, Winnebago and Jayco, who have relied on the Company for substantially all of their RV air conditioner needs for each of the past eleven years. In addition, the Company supplies furnaces, water heaters and cooking appliances to a large number of OEMs under the "Suburban" brand name. Suburban entered the RV heating market over 30 years ago and has a well recognized reputation for innovation, quality and service. Suburban acquired an established water heater line in 1988 and entered the cooking appliance field in 1997. The Suburban product line has many attractive advantages including quiet operation and long life. Combining these advantages with outstanding customer service, Suburban has longstanding relationships with a number of major OEM customers such as Winnebago, Thor, Fleetwood, and Forest River. Sales to such OEMs provide the Company with a large installed base of products which generates a significant recurring stream of revenue through sales of parts and replacement units in the aftermarket. Aftermarket air conditioner sales to customers such as RV dealers, supply and service centers are achieved primarily through an agreement with The Coast Distribution System, Inc. ("Coast"), the largest wholesale distributor of aftermarket products in the RV industry. The Company believes that Coast's extensive market penetration and large sales force provide broad aftermarket coverage and distribution capabilities which enhance its substantial aftermarket business. The Company also supplies Suburban brand LP gas fired appliances to Coast and a number of other aftermarket distributors. As in its air conditioning products, the Company believes its LP gas appliances offer a greater value and superior performance than those products produced by its competition. In fiscal 2003, as a percentage of Airxcel's net sales, RV industry OEM sales represented 64%, and aftermarket sales represented 17%. In addition to serving the RV industry, the Company designs, manufactures and markets specialty wall mount air conditioners, packaged terminal air conditioners with gas heat, ECUs, reverse cycle air conditioners and heat pumps for various applications. Customers are principally school districts and bid and spec mechanical contractors, telecommunication shelter and cabinet manufacturers, telecommunication service providers and their upgrade contractors, modular construction companies and pleasure yacht manufacturers. Sales are generated through manufacturers representatives and a direct sales force for all markets. The Company believes that it is one of the largest providers of heating, ventilating, air conditioning, and dehumidifying equipment for the individually air conditioned classroom market. The Company believes that it will continue to benefit from an increased need for cooling units in the nation's schools due to building codes that mandate fresh air requirements in classrooms, new legislation that requires classroom occupancy reduction, the rebuilding of school system infrastructures and the steadily growing student population. The Company supplies wall mount air conditioners to multiple school districts throughout the country, including the Los Angeles Unified School District, Orange County, Florida and Charleston County, South Carolina. The Company also believes that it is well-positioned to benefit from a recovery in cellular, wireless, fiber optics and PCS telecommunications markets and the resulting demand for telecommunication cabinets and shelters. These markets are served through OEM accounts like Cellxion, Fibrebond, Dupont and Oldcastle. Its focus on customer service and quality control and its strong reputation for its ability to offer a broad and innovative line of products in a timely manner has attracted significant telecommunication providers such as Nextell, Cingular, T-Mobile, Verizon and AT&T to specify its products for both renovation and new construction. The Company has a leading position in each of its principal specialty markets, through solid relationships with its customers who generally require tailored products and a high level of customer service. The ability to customize products without interruption of its larger production lines allows the Company to work closely with customers to develop and produce equipment that meets their specific needs quickly and efficiently. Marvair recently introduced the reverse cycle air conditioner for pleasure yachts. Four sizes of units are Page 4 of 52 currently offered throughout the United States. Customers include yacht builders and dealers for replacement sales. In fiscal 2003, sales to the telecommunication shelter industry and school industry represented 13% of Airxcel's total net sales. AVAILABILITY OF RAW MATERIALS Most of the major component parts for the products such as compressors, coils, electrical parts, and motors are purchased preassembled from suppliers. Significant amounts of steel, copper, and plastic are also purchased. The Company has strong relationships with its suppliers and has alternate suppliers for all of its major components. LIMITED USE OF COLEMAN BRAND NAME The Company has an exclusive, royalty-free license to use the name "Coleman" on certain products for a period of 50 years ending in 2041. Such license automatically renews for another 50 years provided the Company is in compliance with all material terms of the trademark license agreement. The Company's license to use the "Coleman" brand name on a stand-alone basis expired on April 30, 1997. As a result, the Company must use an additional name or product name in conjunction with the "Coleman" brand name. SEASONALITY A significant part of the Company's operations are directly dependent upon the conditions in the highly cyclical RV industry, highly competitive telecommunications industry and the commercial and public construction industry. Companies within these industries, including the Company's largest customers, are subject to volatility in operating results due to external factors such as economic, demographic and political changes. These factors include seasonal factors, fuel availability and fuel prices, overall consumer confidence and general economic conditions, the level of discretionary consumer spending, government regulation, interest rates and unemployment. DEPENDENCE UPON SIGNIFICANT CUSTOMERS Airxcel's net sales to Fleetwood Enterprises, Thor Industries, Forest River, Coast Distribution, Winnebago Industries, and Jayco, its largest customers, accounted for approximately 48% of the Company's net sales for 2003. There can be no assurance that the Company will maintain or improve these relationships or that the Company will continue to supply these customers at current levels. The loss of a significant portion of sales to any of these customers could have a material adverse effect on the financial position, results of operations or liquidity of the Company. In addition, many of the arrangements that the Company has with such customers are by purchase order and terminable at will at the option of either party. A significant decrease or interruption in businesses of any of the Company's significant customers could have a material adverse effect on the financial position, results of operations or liquidity of the Company. COMPETITIVE CONDITIONS The recreation vehicle industry is highly competitive, both as to price and quality of the product. As of December 31, 2003 there were four primary competitors to Airxcel within the industry. The school and telecommunications air conditioning industry is also highly competitive with four major competitors. Although the Company competes with a number of Page 5 of 52 established companies that have greater financial, technological and marketing resources, Airxcel believes it has a competitive advantage due to the following: Strong Market Position in Principal Niche Markets. The Company has a large share of the total North American RV air conditioning, heating, and water heating market and believes it is one of the largest providers of heating, ventilating, air conditioning, and dehumidifying equipment for the individually air conditioned classroom market. Additionally, the Company believes it is the largest provider of environmental control equipment of the U.S. telecommunications market. The Company believes that its strong market shares enable it to maintain significant competitive advantages in serving its customers, including manufacturing efficiencies and greater product development and marketing resources. Success in such markets has historically been driven by areas in which the Company believes it compares favorably with its competitors such as strong customer relationships, industry expertise, product quality and speed and reliability of service. Existing Long-Term Customer Relationships. The Company has long-term relationships with most of its customers, including several of the largest OEMs, major telecommunications companies and equipment manufacturers and school districts. Airxcel has supplied leading OEMs such as Fleetwood, Winnebago and Jayco substantially all of their air conditioner needs for each of the past eleven years. The Company believes that such customer loyalty coupled with a focused product line and reputation for meeting high volume production demands have led to its success in the seasonal RV air conditioning industry and provide a significant advantage over competitors. Airxcel has worked closely with its school and telecommunications customers, in some cases for as long as twenty years, to develop equipment to meet such customers' specialized requirements. To support such equipment, the Company has an extensive network of service dealers across the U.S. Strong Brand Name Recognition. The Company markets its RV air conditioners using the well established and recognized "Coleman" brand name. The "Coleman" brand name, established in the early part of the twentieth century, is well recognized as a leading brand name for a variety of products related to the outdoor recreation industry. Coleman brand RV air conditioners have been the leading RV air conditioners since they were introduced into the market and are recognized by customers to represent high quality and reliability. The "Suburban" brand name was established in the late 1940's and is synonymous with providing quality LP gas fired appliances to the RV industry including furnaces, water heaters and cooking appliances. The Company also benefits from the strong brand name recognition of its "Marvair" name in the telecommunication shelter market and its "Scholar", "Classic" and "GreenPac" names in the school market. High Quality Products, Customer Service and Product Design Capabilities. The Company believes it is recognized as a leader in the RV industry due to its high product quality and customer service. The Company believes that its efficient manufacturing and assembly processes enable it to offer competitively priced products while maintaining high product quality. Because of the seasonal nature of the RV industry, timely delivery of products to OEMs and aftermarket customers has played a critical role in the Company's long-standing success. Similarly, Marvair has developed a strong reputation with its customers for its ability to develop unique solutions to customers' environmental control needs, respond to short lead times and to deliver its products utilizing lean manufacturing methods. In addition, Marvair attained its ISO-9001 certification during 1998. In early 2002, Marvair achieved the most current certification of ISO 9000-2000. Page 6 of 52 Extensive Distribution Network and Experienced Sales Force. The Company believes its sales force, who are located in close proximity to and actively work with many of the largest OEMs regarding product design issues and estimated future orders, includes some of the most experienced sales people in the RV industry. In addition, the Company provides Coast, the largest wholesale distributor of replacement parts, supplies, and RV accessories, serving more than 15,000 customers throughout the U.S. and Canada, with 100% of its RV air conditioning products. Airxcel believes that Coast provides broad aftermarket coverage and distribution capabilities. Sales efforts outside the recreation vehicle industry are organized by industry segments with sales representatives covering the U.S. telecommunications, school, marine and construction industries as well as international sales. In addition, independent sales representatives actively market products, particularly to school districts and marine applications in which sales agents have developed relationships covering a variety of channels, including wholesale distributors, factory direct sales, architectural and engineering firms, original equipment manufacturers, end users and the international market through distributors. NUMBER OF PERSONS EMPLOYED As of December 31, 2003, the Company had 889 employees of which 328 were represented by a bargaining agreement which expires October 6, 2006. ITEM 2. PROPERTIES The following table describes the principal facilities utilized by the Company for manufacturing, warehousing, and administrative purposes.

ITEM 3. LEGAL PROCEEDINGS On April 15, 1999, the jury in a case involving patent, trademark and trade dress infringement, Bard Manufacturing Company et al. v. Crispaire Corporation, No. 3:95-CV-7103 (N.D. Ohio 1998) awarded damages against Crispaire for patent infringement in an amount of $9,000,000. The matter was settled during the first quarter of 2001 and all related legal proceedings have been dismissed. Although the terms of the settlement are confidential, previous accruals exceed any payments made, and there will be no additional charges or accruals as a result of the settlement. The settlement does not require any change in the product offerings of the Company. In addition to the claim previously described, the Company is a party to various litigation matters incidental to the conduct of its business. Management does not believe that the outcome of any of the matters in which it is currently involved will have a material adverse effect on the financial position, results of operations or liquidity of the Company. Page 7 of 52 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There has been no submission of matters to a vote of security holders during the fourth quarter of fiscal year 2003. Page 8 of 52 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company does not have any publicly traded equity securities. ITEM 6. SELECTED FINANCIAL DATA Five Year Summary of Selected Financial Data Years Ended December 31 (in thousands)

----------- (1) EBITDA, as calculated by the Company, may not be similar to the method used by other companies. Airxcel has included information concerning EBITDA because it is relevant for covenant analysis under the Indenture, which defines EBITDA as set forth above for the periods shown, and is presented because it is used by certain investors as a measure of a company's ability to service debt. EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other consolidated income or Page 9 of 52 cash flow data prepared in accordance with accounting principles generally accepted in the United States or as a measure of a company's profitability or liquidity. (2) Excludes depreciation and amortization related to the discontinued Faulkner manufacturing division. (3) Working capital represents current assets less current liabilities, including net liabilities of the discontinued Faulkner manufacturing division of $0, $0, $100, $228, and $662 as of December 31, 2003, 2002, 2001, 2000, and 1999, respectively. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of the financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Continuously, the Company evaluates its estimates which are based on various assumptions and historical experience. Actual results may differ from these estimates depending upon a variety of factors. The Company recognizes revenue and related direct expenses when the merchandise is shipped. Other operating expenses are recognized as incurred. An allowance for doubtful accounts is maintained for uncollectible accounts receivable. An analysis of the historical bad debts and customers' payment trends are performed to evaluate the adequacy of the allowance for doubtful accounts. The accounts receivable balance was $13.5 million, net of allowance for doubtful accounts of $.6 million as of December 31, 2003. In the event the Company's customers are unable to make required payments, revisions to the allowance for doubtful accounts would be required. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002. This new accounting standard required that goodwill and indefinite lived assets no longer be amortized but instead be tested at least annually for impairment and expensed against earnings when the implied fair value of a reporting unit, including goodwill, is less than its carrying amount. The Company engaged an independent appraisal company to assist with the valuation. Upon initial application of SFAS No. 142, the Company reassessed the useful lives of the intangible assets and determined that certain trademarks are deemed to have an indefinite useful life because they are expected to generate cash flows indefinitely and there are no legal or contractual restrictions on their use. In addition, assembled work force and customer base was reclassified to goodwill in accordance with SFAS No. 142. Other trademarks have a finite life and will continue to be amortized over their remaining useful life. The Company has three reporting units with goodwill. As determined by the step one assessment for each reporting unit as of the January 1, 2002 date of adoption, the estimated fair value, based on a present value valuation, was less than its carrying amount including goodwill. Step two of the assessment indicated there was impairment, net of tax, of $19,718,000, which was recorded as a cumulative effect of a change in accounting principle in the accompanying 2002 consolidated statement of operations. Annual reviews for impairment performed by the company in the fourth quarters of 2002 and 2003 indicated no further impairment of goodwill or other indefinite lived assets. The Company adopted SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" as of January 1, 2002. This standard supercedes both SFAS No. 121 "Accounting for the Page 10 of 52 Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and sections of Accounting Principles Board Opinion 30, providing one accounting model with which to review for asset impairment. SFAS No. 144 retains much of the recognition and measurement provision of SFAS No. 121, but removes goodwill and other indefinite lived assets from its scope. It also alters the criteria of classifying long-lived assets to be disposed of by sale and changes the method of accounting for the disposal of long-lived assets if other than through a sale. Finally, while this statement retains the basic presentation provisions for discontinued operations, it broadens the definition of a discontinued operation to include a component of an entity. The Company has determined the adoption of this standard did not have a material effect on the consolidated financial position, results of operations or cash flows. While the Company continually monitors the quality of the products it produces, occasionally product failures occur. An estimated cost of product warranty is recognized at the time the revenue is recognized. The Company estimates the cost of its product warranty obligation based on historical analysis of sales and warranty costs incurred. At December 31, 2003, the warranty reserve balance was $2.2 million. Should actual product failure rates differ from the Company's estimates, a revision to the warranty obligation would be required. The Company reserves for obsolete inventory based upon assumptions of future product requirements of its customers. If actual requirements of its customers differ from the Company's estimates, additional inventory write offs may be required. YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002 Net Sales. Net sales increased 1.3% from $159.1 million in 2002 to $161.2 million in 2003. Net sales increased primarily due to volume growth within the RV industry. Gross Profit. Gross profit increased 9.2% from $29.4 million (19% of net sales) in 2002 to $32.1 million (20% of net sales) in 2003. The increase was principally due to cost reduction efforts and the effects of higher volumes, particularly in the RV industry. Selling, general and administrative expenses (including amortization of intangible assets and computer software). Selling, general and administrative expenses decreased 8.0% from $17.5 million (11% of net sales) in 2002 to $16.1 million (10% of net sales) in 2003, primarily due to decreased amortization expense related to intangible assets becoming fully amortized and efforts to reduce certain fixed and other costs. Interest Expense. Interest expense decreased 0.5% from $10.8 million in 2002 to $10.7 million in 2003 primarily due to reductions in average long term borrowings outstanding resulting from positive operating cash flows, and decreased average interest rates on outstanding borrowings. EBITDA. EBITDA was $15.3 million in 2002 and $19.1 million in 2003. The increase is primarily due to the increased gross profit and decreased selling, general and administrative expenses as described above. Income from continuing operations before income tax expense and cumulative effect of change in accounting principle. Income from continuing operations before income tax expense and cumulative effect of change in accounting principle increased from $.9 million in 2002 to $5.2 million in 2003 primarily due to the increased gross profit and decreased selling, general and administrative expense as described above. Page 11 of 52 Cumulative effect of change in accounting principle. Cumulative effect of change in accounting principle decreased as a result of the adoption in 2002 of SFAS No. 142, and the impairment charges recorded in 2002, as further discussed in Note 2(g) of the notes to the consolidated financial statements. Net income (loss). Net income (loss) improved from a net loss of $19.1 million in 2002 to a net income of $3.2 million in 2003 primarily as a result of the cumulative effect of change in accounting principle recorded in 2002, with no impairment losses recorded in 2003, and the conditions resulting in the increased income from continuing operations as described above. YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001 Net Sales. Net sales increased 9.6% from $145.1 million in 2001 to $159.1 million in 2002. Net sales increased primarily due to volume growth within the RV industry. Gross Profit. Gross profit increased 7.7% from $27.3 million (19% of net sales) in 2001 to $29.4 million (19% of net sales) in 2002. The increase was principally due to the increased sales volume. Selling, general and administrative expenses (including amortization of intangible assets and computer software). Selling, general and administrative expenses decreased 4.4% from $18.3 million (13% of net sales) in 2001 to $17.5 million (11% of net sales) in 2002, primarily due to decreased amortization expense of goodwill and other indefinite lived intangible assets due to adoption of SFAS No. 142 and to other intangible assets becoming fully amortized. In addition, the decrease in selling, general and administrative expense as a percentage of sales is due to the relatively fixed nature of many of these costs. Accrued litigation (income) expense. Accrued litigation income decreased as a result of the settlement of the litigation in 2001 as described in Note 11 of the notes to the consolidated financial statements. Interest Expense. Interest expense decreased 5.3% from $11.4 million in 2001 to $10.8 million in 2002 primarily due to reductions in average long term borrowings outstanding resulting from improved operating cash flows and decreased average interest rates on outstanding borrowings. EBITDA. EBITDA was $19.2 million in 2001 and $15.3 million in 2002. The decrease is primarily due to the decreased accrued litigation income as described above offset by increased gross profit associated with higher sales volumes. Income from continuing operations before income tax expense and cumulative effect of change in accounting principle. Income from continuing operations before income tax expense and cumulative effect of change in accounting principle decreased from $2.7 million in 2001 to $.9 million in 2002, primarily due to decreased accrued litigation income as described above offset by the effects of increased gross profit on higher sales volumes and lower amortization expense associated with intangible assets. Cumulative effect of change in accounting principle. Cumulative effect of change in accounting principle increased as a result of the adoption of SFAS No. 142, in 2002 and the Page 12 of 52 impairment charges recorded as further discussed in Note 2(g) of the notes to the consolidated financial statements. Net income (loss). Net income (loss) decreased from net income of $1.7 million in 2001 to a net loss of $19.1 million in 2002 primarily as a result of the cumulative effect of change in accounting principle and the conditions resulting in the decreased income from continuing operations as described above. LIQUIDITY AND CAPITAL RESOURCES The Company generated $7.4 million in net cash flow from operating activities for the year ended December 31, 2003 compared to $8.8 million for 2002, the decrease primarily the result of higher working capital requirements on increased sales, which in turn generated higher gross profit. Capital expenditures were $1.1 million, $2.5 million, and $2.3 million for the years ended December 31, 2003, 2002, and 2001, respectively. The expenditures include the normal replacement of machinery, equipment and tooling for new products and existing product improvements. Capital expenditures for 2004 are expected to be $2.3 million. Approximately $3.5 million was used in 2003 to purchase the notes originally issued by Holdings as discussed further in note 1 to the consolidated financial statements. The Company's revolving credit facility with the bank, which matures June 29, 2005, is limited to the lessor of $25 million or the sum of 85% of net accounts receivable and 60% of net inventories. The outstanding borrowing on the credit facility at December 31, 2003 is $4.7 million which is approximately $2.9 million less that that outstanding at December 31, 2002, the net repayment made possible from improved operating cash flows in 2003. Interest on the revolving credit facility is based on the lower of either the bank's base rate or LIBOR rate plus 2% (3.15% combined rate at December 31, 2003). In addition to the revolving credit facility, the Company is party to senior subordinated notes which mature on November 15, 2007. The $90.0 million in notes payable bear interest at 11%, payable semiannually in May and November. Additionally, the Company has an outstanding note payable to an individual for a land purchase totaling $.2 million at December 31, 2003, which matures in 2007. The Company is also party to capital lease obligations for machinery and equipment and furniture and fixtures, which expire in 2007. Total outstanding capital lease obligations at December 31, 2003 are $.1 million. The Company leases certain buildings, machinery and equipment, office equipment and vehicles which are accounted for as operating leases. Some leases include renewal options and others contain purchase options. Total future commitments under the operating lease agreements amount to $1.4 million as of December 31, 2003. The Company is a wholly-owned subsidiary of Holdings. Holdings has no operating activities and no material assets other than its investment in the Company. Accordingly, Holdings is dependent upon the Company for any cash requirements. Holdings has 9,076,923 Page 13 of 52 shares of $1 par value Series A and Series B exchangeable preferred stock outstanding as of December 31, 2003. The Preferred stock which is exchangeable at the option of Holdings for junior subordinated notes issued by Holdings is subject to mandatory redemption by Holdings on November 10, 2008 for an amount equal to the original proceeds from sale of the stock plus accrued but unpaid dividends which accrue at 14% annually. Total proceeds plus accrued and unpaid dividends are $24.5 million as of December 31, 2003. The Company is not required to fund the mandatory redemption of these preferred shares. Holdings also previously issued $4.0 million of junior subordinated notes to the parent company of a major stockholder, in exchange for cash, which are due in November 2008. These notes bear interest at 14% payable semiannually in the form of additional junior subordinated notes or cash at the election of Holdings. Such notes and accrued interest totaled $11.0 million as of December 31, 2003. As part of the Marvair acquisition in 1997, Holdings issued $5.3 million of junior subordinated notes (the "PIK Notes") to the seller. The PIK notes, which are due in November 2008, bear interest at 11.4% payable annually in the form of additional junior subordinated notes or cash at the election of Holdings. The PIK notes, and accrued interest, totaled $9.3 million as of December 31, 2003. In February 2003, the Company purchased all of the PIK Notes from the holders of the PIK Notes for an aggregate purchase price of $3.4 million. Although the Company may determine to distribute the PIK Notes to Holdings, subject to compliance with the Company's credit facility, senior subordinated notes and other debt agreements, the Company does not anticipate this will occur in the foreseeable future. Although Holdings is entirely dependent upon the Company to service its note obligations and the mandatory redemption provisions of the preferred stock, Holdings would not require cash distributions from the Company for debt service until at least 2008 based upon the stated intent of Holdings' management to elect to make interest payments due on all such notes in the form of additional junior subordinated notes. All of the obligations of Holdings described above are uncollateralized and are not guaranteed by the Company, however, the Company is currently exploring various options to satisfy these obligations on behalf of Holdings. Covenants under the Company's credit facility with the bank restrict the ability, subject to certain exceptions, to dispose of assets, incur additional indebtedness, guarantee obligations, prepay other indebtedness or amend other debt instruments, make distributions or pay dividends, redeem or repurchase capital stock, create liens on assets, make acquisitions, engage in mergers or consolidations, and change the business conducted by the Company. In addition, the Company is required to maintain compliance with a fixed charge coverage ratio and maintain a minimum effective capital balance. The credit facility also contains a subjective acceleration clause. The Company was in compliance with these ratios at December 31, 2003 and 2002. The Company anticipates that they will continue to comply in 2004 with the financial covenants. Management's current business plan estimates working capital levels and operating profitability. The achievement of this plan is necessary for compliance with various financial covenants during 2004. The possibility exists that certain financial covenants will not be met if business conditions are other than as anticipated. In such event, the Company would need an amendment or waiver of such financial covenants; however, there can be no assurance that such amendments or waivers will be obtained. The Company meets its working capital, capital equipment requirements and cash requirements with funds generated internally and funds from agreements with a bank. Management currently expects its cash on hand, funds from operations and borrowings available under existing credit facilities to be sufficient to cover both short-term and long-term Page 14 of 52 operating requirements. However, this is dependent upon the future performance of the Company and its subsidiaries which, in turn, is subject to general economic conditions and to financial, business and other factors, including factors beyond the Company's control. The Company did not have any other relationships with unconsolidated entities or financial partnerships, such entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, the Company is not materially exposed to any financing, liquidity, market or credit risk that could arise if the Company were engaged in such relationships. On January 6, 2004 the Company entered into a letter of credit totaling $1.2 million. On March 5, 2004 the Company also amended an existing letter of credit to decrease the amount to $1.1 million. The letters of credit obligate the Company to make payment in the event of default on the agreements with the insurance companies to pay workers compensation claims incurred. Management does not expect any material losses to result from this arrangement because performance is not expected to be required, and therefore, is of the opinion that the fair value of these instruments is zero. INFLATION Results of operations have not been significantly affected by inflation since inception. The Company, in the normal course of business, has been able to offset the impact of increased costs through operating efficiencies and selected price increases. FORWARD-LOOKING INFORMATION Except for the historical financial information contained herein, this Form 10-K contains certain forward-looking statements. For this purpose, any statements contained in this Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "estimate", or "continue", the negative or other variations thereof, or comparable terminology, are intended forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, including possible changes in economic conditions, demographic and political changes, prevailing interest rates or fuel prices, or the occurrence of unusually severe weather conditions, overall consumer confidence and general economic conditions, the level of discretionary consumer spending, government regulation, and unemployment that can affect both the purchase and usage of the products that the Company sells. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk on variable rate financial instruments: The Company maintains a $25 million credit facility which permits borrowings at interest rates based on either the bank's base rate or LIBOR. Increases in market interest rates would cause interest expense to increase and earnings before income taxes to decrease. The change in interest expense and earnings before income taxes would be dependent upon the weighted average outstanding borrowings during the reporting period following an increase in market interest rates. Based on the Company's current outstanding borrowings under the credit facility at an average interest rate of 3.7% per annum, a 1% increase in market interest rates would increase interest expense and decrease earnings before income taxes by approximately $47,000 annually. Page 15 of 52 Market risk on fixed-rate financial instruments: Included in long-term debt are $90 million of 11% Senior Subordinated Notes due 2007. Increases in market interest rates would generally cause a decrease in the fair market value of the Notes and a decrease in market interest rates would generally cause an increase in fair value of the Notes. Page 16 of 52 ITEM 8. FINANCIAL STATEMENTS REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholder Airxcel, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of Airxcel, Inc. and Subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations and comprehensive income (loss), stockholder's equity (deficiency), and cash flows for the years then ended. Our audits also included the financial statement schedule for 2003 and 2002 listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Airxcel, Inc. and Subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule for 2003 and 2002, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP Kansas City, Missouri February 6, 2004, except for Note 4 as to which the date is March 24, 2004 Page 17 of 52 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholder of Airxcel, Inc. In our opinion, the consolidated statement of operations, statement of stockholder's equity (deficiency), and statement of cash flows for the year ended December 31, 2001, present fairly, in all material respects, the results of operations and cash flows of Airxcel, Inc. and its subsidiaries for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP Kansas City, Missouri February 13, 2002, except with respect to the 2001 transitional disclosures relating to the adoption of Statement of Financial accounting Standards No.142 as described in Note 2, as to which date is January 1, 2002 Page 18 of 52 AIRXCEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

See accompanying notes. Page 19 of 52 AIRXCEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands)

See accompanying notes. Page 20 of 52 AIRXCEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIENCY) (in thousands, except shares)

See accompanying notes. Page 21 of 52 AIRXCEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

Page 22 of 52 AIRXCEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands)

See accompanying notes. Page 23 of 52 AIRXCEL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share data) 1. ORGANIZATION AND BASIS OF PRESENTATION: Airxcel, Inc., formerly known as Recreation Vehicle Products, Inc. (the "Company") is engaged in designing, manufacturing and marketing recreation vehicle air conditioning equipment in the United States, Canada and certain international markets. On November 10, 1997, the Company acquired substantially all of the net assets, properties and rights and assumed certain related liabilities of Crispaire Corporation, currently operating as Marvair ("Marvair"), a division of Airxcel, Inc., which designs, manufactures and markets specialty wall mount air conditioners, packaged terminal air conditioners with gas heat, environmental control units, heat pumps for the heating, ventilating and air conditioning industry and marine reverse cycle air conditioners. Marvair markets its products to companies involved in modular construction, telecommunications, utilities, pleasure yacht manufacturers and school districts located throughout the United States and selected foreign markets. On March 17, 1998 the Company acquired 100% of the outstanding stock of Suburban Manufacturing Company, formerly KODA Enterprises Group, Inc. ("Suburban"). Suburban, a wholly-owned subsidiary is a designer and manufacturer of heating, water heating, and cooking appliances for the recreation vehicle industry and other specialty products for the heating, ventilating and air conditioning industry. On November 3, 2000 the Company acquired substantially all of the net assets, properties and rights and assumed certain related liabilities of Instafreeze, Inc., currently operating as Insta Freeze ("Insta Freeze"), a division of Airxcel, Inc., which designs and manufactures low-voltage, compressor refrigeration units for the recreation vehicle, marine and ambulance manufacturing industries. Due to the similarities of the economic characteristics, production processes, customers, distribution methods and regulatory environment of the Company's products, the Company is managed, operated and reported as one segment. The Company is a wholly-owned subsidiary of Airxcel Holdings Corporation, formerly known as RV Holdings Corporation ("Holdings"). The Company is the only subsidiary of Holdings and Holdings has no operating activities and no material assets other than its investment in the Company. Accordingly, Holdings is dependent upon the Company for any cash requirements. However, Holdings does have 1,544,237 shares of $.01 par value common stock and 9,076,923 shares of $1 par value Series A and Series B exchangeable preferred stock outstanding as of December 31, 2003 and 2002. The Preferred stock which is exchangeable at the option of Holdings for junior subordinated notes issued by Holdings is also subject to mandatory redemption by Holdings on November 10, 2008 for an amount equal to the original proceeds from sale of the stock plus accrued but unpaid dividends which accrue at 14% annually. Total proceeds plus accrued and unpaid dividends were $24,209, $21,354, and $18,618 as of December 31, 2003, 2002 and 2001, respectively. All proceeds generated from the sale of such common and preferred shares have been contributed to the Company. However, the Company is not required to fund the mandatory redemption of these preferred shares. During 1996, Holdings also issued $4,015 of junior subordinated notes to the parent company of a major stockholder in exchange for cash. All proceeds from the issuance of these notes have been contributed to the Company. These notes, which are due in November, 2008, bear interest at 14% payable semiannually in the form of additional junior subordinated notes or cash at the election of Holdings. Such notes, plus accrued interest totaled $10,998, $9,589, and $8,360 as of December 31, 2003, 2002 and 2001, respectively. As part of the Page 24 of 52 November 10, 1997 Airxcel acquisition of Marvair, Holdings issued $5,304 of junior subordinated notes (the "PIK Notes") to the seller. The proceeds of the PIK Notes and $3,100 of cash received by Holdings through the sale of its common stock was contributed by Holdings to the Company. The PIK notes, which are due in November, 2008, bear interest at 11.4% payable annually in the form of additional junior subordinated notes or cash at the election of Holdings. Such notes, plus accrued interest, totaled $9,259, $8,299 and $7,439 as of December 31, 2003, 2002 and 2001, respectively. On February 19, 2003, the Company purchased the notes originally issued by Holdings from the holders for an aggregate purchase price of $3,447. These notes, which are reported at cost as notes receivable from Holdings on the accompanying 2003 consolidated balance sheet, mature November 2008. Although the Company may determine to distribute the notes to Holdings, subject to compliance with the Company's credit facility, senior subordinated notes and other debt agreements, the Company does not anticipate this will occur in the foreseeable future. Pursuant to an IRS regulation issued on August 29, 2003, the taxable income to Holdings associated with the note purchase results in a reduction to the tax basis of certain of the Company's assets and has been reflected in the accompanying consolidated financial statements as a non-cash distribution to Holdings and a decrease in deferred income tax assets. In August 1996, Airxcel Holdings Corporation and Subsidiary consummated exchange offers and adopted amendments to its Restated Certificate of Incorporation pursuant to which the outstanding debt and common stock were restructured (the "Recapitalization"). The objective of the Recapitalization was to refinance existing indebtedness and pay fees and expenses associated with the Recapitalization. As a part of the Recapitalization, new debt was issued including a senior subordinate note. This note was issued with detachable stock warrants to purchase 65,882 shares of Class B Common Stock of Holdings at $.02 per share at any time on or before August 22, 2006. The exercise price is subject to adjustment from time to time in order to prevent dilution of the rights granted under the warrants. The holders of these warrants are entitled to receive dividend payments as if the warrants were exercised immediately prior to the date of record for such dividends. The estimated fair value of the warrants at the date of issuance has been recognized as a reduction of the note payable (as debt discount) in the amount of $218 with the offset to additional paid-in capital on Holdings financial statements. On April 3, 1998 new warrants were issued for 229,662.50 shares of Class B Common Stock of Holdings at $.01 per share at any time on or before April 30, 2008. The new warrants are entitled to the same rights as the existing warrants. Proceeds from the issuance of warrants of $765 were contributed by Holdings to the Company. 2. SIGNIFICANT ACCOUNTING POLICIES: a. Management's Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. b. Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and accounts are eliminated in consolidation. c. Revenue Recognition: Revenue and related direct expenses are recognized when the merchandise is shipped. Other operating expenses are recognized as incurred. Page 25 of 52 d. Cash and Cash Equivalents: The Company classifies as cash and cash equivalents amounts on deposit in banks and cash invested temporarily in various instruments with maturities of three months or less at time of purchase. e. Inventories: Inventories are stated at the lower of cost or market. Costs are based on standards which approximate the first-in, first-out (FIFO) method. f. Property, Plant and Equipment: Property, plant and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives as follows: ~~Buildings and building improvements 15-45 years Furniture and fixtures 4-10 years Machinery and equipment 3-15 years~~

Expenditures for repairs and maintenance are charged to operations as incurred. Expenditures which materially increase values, change capacities or extend useful lives of the related asset are capitalized. The cost of an asset and the related accumulated depreciation is removed from the appropriate accounts upon sale of the asset. The resulting gain or loss from the sale is included in operations. g. Intangible Assets: The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002. This new accounting standard requires that goodwill and indefinite lived assets no longer be amortized but instead be tested at least annually for impairment and expensed against earnings when the implied fair value of a reporting unit, including goodwill, is less than its carrying amount. The Company engaged an independent appraisal company to assist with the valuation. Upon initial application of SFAS No. 142, the Company reassessed the useful lives of the intangible assets and determined that certain trademarks are deemed to have an indefinite useful life because they are expected to generate cash flows indefinitely and there are no legal or contractual restrictions on their use. In addition, assembled work force and customer base was reclassified to goodwill in accordance with SFAS No. 142. Other tradenames have a finite life and will continue to be amortized over their remaining useful life. The Company has three reporting units with goodwill. As determined by the step one assessment for each reporting unit as of the January 1, 2002 date of adoption, the estimated fair value, based on a present value valuation, was less than its carrying amount including goodwill, primarily due to the decline in the telecommunications industry. Step two of the assessment indicated there was impairment of goodwill and certain trademark costs, amounting to $19,718 (net of $10,130 in taxes), which was recorded as a cumulative effect of a change in accounting principle in the accompanying 2002 consolidated statement of operations. Annual reviews for impairment performed by the company in the fourth quarters of 2002 and 2003 indicated no further impairment of goodwill or other indefinite lived assets. Page 26 of 52 Intangible assets, which are amortized on a straight-line basis over their estimated economic lives, are as follows:

Amortization of finite lived intangible assets for the years ended December 31, 2003, 2002 and 2001 was $291, $829, and $983, respectively. Amortization for the remaining amount of finite lived intangible assets, as of December 31, 2003, is expected to be $272 in 2004, $105 in 2005, $77 in 2006, $75 in 2007, and $75 in 2008. The following pro forma table reflects the effects of the adoption of SFAS No. 142 on income to exclude amortization on goodwill and indefinite lived intangible assets, net of any related tax effects.

h. Impairment of Long Lived Assets: On January 1, 2002, the Company adopted SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". This standard supercedes both Page 27 of 52 SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and sections of Accounting Principles Board Opinion 30, providing one accounting model with which to review for asset impairment. SFAS No. 144 retains much of the recognition and measurement provision of SFAS No. 121, but removes goodwill and other indefinite lived assets from its scope. It also alters the criteria of classifying long-lived assets to be disposed of by sale and changes the method of accounting for the disposal of long-lived assets if other than through a sale. Finally, while this statement retains the basic presentation provisions for discontinued operations, it broadens the definition of a discontinued operation to include a component of an entity. During 2002 the Company determined that certain patent and license agreement costs, based on a present value valuation, were impaired. An impairment charge of $65 was recognized and included in other expense. No impairment charges were recorded in 2003. i. Loan Financing Costs: Loan financing costs are amortized using the effective yield method over the contracted terms of the related debt. j. Income Taxes: The Company and its parent file a consolidated federal income tax return. Deferred income taxes are recorded to reflect the tax consequences in future years of operating loss carry forwards and temporary differences between the tax basis of assets and liabilities and their financial reporting amounts using enacted tax rates for the years in which these items are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is comprised of the tax payable for the period and the change during the period in deferred tax assets and liabilities. k. Concentration of Credit Risk. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. The credit risk on trade receivables is controlled through credit approvals, limits and monitoring procedures. Trade receivables are generally due within 30 days. The majority of the Company's trade receivables are from customers in the RV industry. Credit losses are provided for in the accompanying consolidated financial statements and historically have been insignificant. The Company's ten largest customers accounted for approximately 57%, 58% and 50% of net sales for the years ended December 31, 2003, 2002 and 2001, respectively, and approximately 38% and 46% of accounts receivable at December 31, 2003 and 2002, respectively. Sales to customers in excess of 10% of consolidated net revenues are as follows:

The Company maintains its cash accounts primarily with major financial institutions, and had bank balances at December 31, 2003 and 2002 that exceeded FDIC insurance limits by $0 and $53, respectively. l. Advertising: The Company expenses advertising costs when the expense is incurred and classifies it in selling, general and administrative expense. Total advertising expense amounts to $204, $354, and $361 in 2003, 2002, and 2001, respectively. Page 28 of 52 m. Shipping and Handling Costs: The Company records charges to customers for shipping and handling as sales, and costs incurred by the Company as cost of goods sold. n. Fair Value of Financial Instruments: The stated values of financial instruments as of December 31, 2003, 2002 and 2001, excluding the $90 million of senior subordinated notes, approximate fair market value. The fair value of the Company's senior subordinated notes is $84.6 million at December 31, 2003 based on the quoted market price for the same issue or similar issues. o. Collective Bargaining Agreement: As of December 31, 2003, the Company had 889 employees of which 37% were represented by a bargaining agreement that expires October 6, 2006. 3. SUMMARY BALANCE SHEET DATA: Inventory consists of the following:

Property, plant and equipment, including amounts under capital leases, consist of the following:

Page 29 of 52 4. LONG-TERM DEBT: Long-term debt consists of the following:

Covenants under the Company's credit facility with the bank restrict the ability, subject to certain exceptions, to dispose of assets, incur additional indebtedness, guarantee obligations, prepay other indebtedness or amend other debt instruments, make distributions or pay dividends, redeem or repurchase capital stock, create liens on assets, make acquisitions, engage in mergers or consolidations, and change the business conducted by the Company. In addition, the Company is required to maintain compliance with a fixed charge coverage ratio and maintain a minimum effective capital balance, as defined. The credit facility also contains a subjective acceleration clause and a requirement to maintain a lock-box or other account by which the bank can apply cash receipts against the revolver balance. On March 24, 2004, the credit facility was amended to not require a lock-box or other account by which the bank can apply cash receipts against the revolver balance unless an event of default occurs. As such, amounts outstanding under this revolving line of credit are classified as long-term liabilities on the accompanying consolidated balance sheets, as the application of the subjective acceleration is not anticipated. The credit facility is collateralized by accounts receivable, equipment, general intangibles, inventory, and investment property. The Company was in compliance with these ratios at December 31, 2003 and 2002. The Company anticipates that they will continue to comply in 2004 with the financial covenants based on estimates of working capital levels and operating profitability included in management's current business plan for 2004. The achievement of this plan is necessary to comply with the various financial covenants during 2004. The possibility exists that certain financial covenants will not be met if business conditions are other than as anticipated. In such event, the Company would need an amendment or waiver of such financial covenants; however, there can be no assurance that such amendments or waivers will be obtained. The Company may redeem the senior subordinated notes, in whole or in part, at any time on or after November 15, 2002, at redemption prices ranging from 100 to 105.5% of the principal being paid based on the redemption periods defined in the agreement. The aforementioned notes are uncollateralized and contain, among other things, certain financial covenants and restrictive provisions pertaining to the use of funds, payment of dividends and ability to incur obligations. Page 30 of 52 The ability of the Company to meet its debt service and working capital obligations and capital expenditure requirement is dependent upon the future performance of the Company and its subsidiaries which, in turn, is subject to general economic conditions and to financial, business and other factors, including factors beyond the Company's control. Principal maturities of long-term debt, and capital lease amortization, based on balances outstanding at December 31, 2003 for each of the five succeeding years are as follows:

Property, plant and equipment include the following amounts for capital leases:

5. STOCK OPTION PLANS: On May 23, 2000, Holdings adopted a Stock Option Plan for key employees and/or directors of the Company to purchase up to 324,667.37 shares of Class A Common Stock of Holdings at $1 per share. When granted, the stock options may be exercised after the "trigger date", and will expire at the earlier of 15 years from the date the plan is adopted or the date the employee ceases to be an employee of the company. As defined in the Stock Option Plan, the "trigger date" is the date on which the majority shareholder of Holdings has disposed of 60% or more of the securities held by it on January 1, 1998 (i.e. common stock, preferred stock and notes purchased by the majority shareholder) for cash and/or marketable securities. The number of stock options that may be exercised is based on the estimated annual interest rate of return as of the trigger date as set forth in the plan agreement. No compensation expense relating to this stock option plan will be recorded until the trigger date. In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation" as amended by SFAS No. 148 "Accounting for Stock Based Compensation-Transition and Disclosure", the Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, compensation cost for stock options granted to the Company's employees is measured as the excess, if any, of the fair value of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. The Company has not recorded any compensation expense for the years ended December 31, 2003, 2002, and 2001. Page 31 of 52 6. INCOME TAXES: The significant components of the net deferred income tax asset (liability) recognized in the accompanying consolidated balance sheets are as follows:

The components of income tax (benefit) expense from continuing operations, exclusive of taxes related to the extraordinary items and cumulative effect of change in accounting principle, are as follows:

Income tax expense from continuing operations differed from the amounts computed by applying the federal statutory rate to pretax income as follows:

7. COMMITMENTS: The Company leases buildings, machinery and equipment, office equipment and vehicles which are accounted for as operating leases. Some leases include renewal options and others contain purchase options. Total rental expense for operating leases was $635, $779 and $823 for the years ended December 31, 2003, 2002 and 2001, respectively. Page 32 of 52 Commitments for future minimum lease payments under noncancellable leases as of December 31, 2003 are as follows:

8. BENEFIT PLAN: Substantially all employees of the RV Products division and the Marvair division are eligible to participate in the 401(k) plans offered by each company. Subject to certain conditions, the divisions may match up to 30% of the employees' contributions, respectively, up to a maximum of 6% of the employees' annual salary. In addition, the divisions can make an additional contribution determined at the discretion of the Company's Board of Directors. The Company's contribution to its 401(k) plans for the years ended December 31, 2003, 2002 and 2001 totaled $316, $303 and $346, respectively. Suburban sponsors two contributory defined benefit pension plans, the Suburban Manufacturing Company Retirement Plan ("Plan 1") and the Suburban Manufacturing Company Retirement Plan for Bargaining Employees ("Plan 2"). The plans cover substantially all Suburban Manufacturing Company employees meeting certain eligibility requirements. Assets of the plans consist of various marketable securities and investments in bond funds. The Company's funding policy is to contribute amounts that are sufficient, when added to participants' contributions, to fund the retirement benefits of all participants in accordance with the requirements of the Internal Revenue Code. The Company's contribution to the defined benefit pension plans is expected to be $494 in 2004. The plans actuarial measurement dates are September 30, 2003 and 2002. In accordance with SFAS No. 87, "Employers' Accounting for Pensions" an additional minimum pension liability for pension plans with accumulated benefits in excess of plan assets must be recognized. At December 31, 2003, 2002, and 2001 a minimum pension liability adjustment of $431, $950, and $35 (net of income tax benefit of $270, $595, and $22), respectively, is included in the accompanying consolidated financial statements. Page 33 of 52

The Company's asset allocations at December 31, 2003 and 2002, by asset category are as follows:

Page 34 of 52

Benefits expected to be paid as of December 31, 2003 are as follows: 2004 $ 207 2005 236 2006 242 2007 273 2008 326 2009 - 2013 2,689 ------- $ 3,973 =======

The primary investment objective of the defined benefit pension plans is to seek and earn a total rate of return modestly greater than that provided by a portfolio equally divided between U.S. stocks and bonds. This objective desires to keep portfolio risk below that of common stocks but to pursue a return greater than that provided by bonds. The general approach in determining the long term rate of return is to use a weighted-average of expected returns for each major asset class, based on the target asset allocation percentages incorporated in the plan's investment strategy. The expected returns for each major asset class are based primarily on historical returns in the post-war period. It is expected that future returns over the time horizon of the plan may be slightly less than historical returns, and therefore the actual long-term rate of return on assets assumption is set at a slightly lower level than would be determined based on historical returns alone. 9. RESTRUCTURING CHARGE: In November 2000, the board of directors of the Company approved a restructuring plan designed to reduce costs and improve operating efficiencies. The plan involved the consolidation of two manufacturing facilities and the discontinuance of a product line. A restructuring charge relating to severance and employee benefit costs and costs relating to the closure of the facility was recorded at that time. At June 30, 2001, the restructure was complete and no restructuring charges remained in accrued liabilities. 10. DISCONTINUED OPERATIONS: During September 1997, the Company adopted a plan to discontinue its Faulkner manufacturing division. A significant amount of the assets of the division were liquidated and the liabilities were settled during 2002 and 2001. Accordingly, Faulkner is reported as a discontinued operation for the years ended December 31, 2003, 2002 and 2001. Page 35 of 52 There were no sales from the Faulkner division for the years ended December 31, 2003, 2002 and 2001. Liabilities of the discontinued operations were $0, $0 and $100 at December 31, 2003, 2002 and 2001, respectively, which primarily consist of remaining warranty obligations. The recoveries on the disposal of Faulkner were $0, $100, and $128 at December 31, 2003, 2002 and 2001 respectively. 11. LITIGATION: On April 15, 1999, the jury in a case involving patent, trademark and trade dress infringement, Bard Manufacturing Company et al. v. Crispaire Corporation, No. 3:95-CV-7103 (N.D. Ohio 1998) awarded damages against Crispaire for patent infringement in an amount of $9,000. The matter was settled during the first quarter of 2001 and all related legal proceedings have been dismissed. Although the terms of the settlement are confidential, previous accruals exceed any payments made, and there will be no additional charges or accruals as a result of the settlement. The remaining accrual at the date of settlement was written off to income and is included in the accompanying 2001 consolidated statement of operations. The settlement does not require any change in the product offerings of the Company. In addition to the claim that was previously described, the Company is a party to various other litigation matters incidental to the conduct of its business. Management does not believe that the outcome of any of the matters in which it is currently involved will have a material adverse effect on the financial position, results of operations or liquidity of the Company. 12. SUBSEQUENT EVENT: On January 6, 2004 the Company entered into a letter of credit totaling $1,210. On March 5, 2004 the Company also amended an existing letter of credit to decrease the amount to $1,064. The letters of credit obligate the Company to make payment in the event of default on the agreements with the insurance companies to pay workers compensation claims incurred. Management does not expect any material losses to result from this arrangement because performance is not expected to be required, and therefore, is of the opinion that the fair value of these instruments is zero. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On May 16, 2002, Airxcel, Inc. (the "Company") dismissed PricewaterhouseCoopers LLP as its independent auditor. The decision to dismiss PricewaterhouseCoopers LLP was approved by its Board of Directors. The reports of PricewaterhouseCoopers LLP on the financial statements of the Company for each of the years ended December 31, 2000 and 2001 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. In connection with its audits for the years ended December 31, 2000 and 2001 and through the interim period between December 31, 2001 and May 16, 2002, there were no Page 36 of 52 disagreements between the Company and PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused it to make reference to the subject matter of the disagreements in connection with its report on the financial statements for such years. During the years ended December 31, 2000 and 2001, and the interim period between December 31, 2001 and May 16, 2002 there were no reportable events (as defined in Item 301(a) (1) (v) of Regulation S-K promulgated by the Securities and Exchange Commission) except that in connection with its audit for the year ended December 31, 2001, PricewaterhouseCoopers LLP reported to the Board of Directors a material weakness in the inventory system at the Company's Marvair division. The Company has authorized PricewaterhouseCoopers LLP to respond fully to Ernst & Young LLP (successor auditor) concerning this matter. The Company has engaged Ernst & Young LLP as its new independent auditor, effective May 21, 2002. During the years ended December 31, 2000 and 2001, and the interim period between December 31, 2001 and May 16, 2002, the Company did not consult with Ernst & Young regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, (ii) the type of audit opinion that might be rendered on the Company's financial statements or (iii) any matter that was either the subject of a disagreement or a reportable event. ITEM 9(a). CONTROLS AND PROCEDURES (a) Disclosure 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 such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this annual report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective. (b) Internal Controls Over Financial Reporting. There have not been any changes in the Company's internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting. Page 37 of 52 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth certain information with respect to the persons who are members of the Board of Directors or executive officers of the Company.

Melvin L. Adams. Mr. Adams has been a Director, the Chief Executive Officer and President of Airxcel since 1991. From 1989 until 1991, he served as Vice President of The Coleman Company. From 1979 through 1984, he served as General Manager of The Coleman Company's Camping Trailer Division. In 1984, he was promoted to Corporate Vice President & General Manager of Coleman's RV Group. In 1991, he and three officers of RVP led the buy out of Coleman RV Products with Berkshire Partners from MacAndrews and Forbes. Gregory G. Guinn. Mr. Guinn was promoted to President of the RV Products Division of Airxcel, Inc. in 1999. From 1989 to 1998, he served as Vice President of Sales and Marketing of RVP. Prior to that, Mr. Guinn held various positions with The Coleman Company, including National Sales Manager and Marketing Manager of RV Products and Corporate Vice President and General Manager of RV Products. Mr. Guinn handles all of RVP's major accounts and its internal sales force. Richard L. Schreck. Mr. Schreck has been the Chief Financial Officer, Secretary and Treasurer of Airxcel since 1991. Beginning in 1981, Mr. Schreck held various positions at The Coleman Company, including Corporate Vice president of Operational Finance, RV Group Controller and Controller/Administrative Manager for RV Products. Mr. Schreck is responsible for all financial and MIS functions at Airxcel. Lonnie L. Snook. Mr. Snook has been Vice President-Manufacturing and Engineering of RVP since 1989. Prior to that, Mr. Snook held various positions at The Coleman Company, including Industrial Engineer, Manager of Industrial Engineering and Production Superintendent and Factory Manager of RV Products. George D. Wyers. Mr. Wyers retired as President of the Marvair Division of Airxcel on October 31, 2000. Prior to the acquisition, he served as President and Chief Executive Officer of Marvair, a position he held since 1988. Prior to joining Marvair, Mr. Wyers spent twelve years as a General Manager of a leading air conditioning equipment distributor based in Dallas, Texas. Page 38 of 52 Dean T. DuCray. Mr. DuCray has been a director of the Company since 1996. In April 1998 Mr. DuCray retired as Chief Financial Officer and Vice President of York International Corporation, a position held since 1987, a manufacturer of heating and air conditioning equipment. Mr. DuCray is currently serving as a consultant for various companies. Lawrence Jones. Mr. Jones has been a director of the Company since 1991. Mr. Jones retired from The Coleman Company February 1, 1994 having served as its Chairman and CEO since 1989. Mr. Jones served as Chairman of the Executive Committee at The Coleman Company from 1994 to 1995. From 1995 to 1997, Mr. Jones served as consultant and Chairman of Roller Blade (in line skates) and Prince Sports (tennis rackets). Mr. Jones retired from the Fleming Company's (food distribution) Board of Directors on January 1, 1998. James A. Urry. Mr. Urry has been a director of the Company since 1996. Mr. Urry has been with Citibank, N.A. since 1981 and currently serves as a partner of CVC. He is a director of Intersil Corporation, AMI Semiconductor, Inc. and York International Corporation. COMPENSATION OF DIRECTORS Directors of the Company who are officers, employees of the Company or its affiliates are presently not expected to receive compensation for their services as directors. Directors of the Company who are not officers or employees of the Company or any of its affiliates receive $2,000 per Board meeting attended. In addition, directors of the Company will be entitled to reimbursement of their reasonable out-of-pocket expenses in connection with their travel to and attendance at meetings of the board of directors or committees thereof. CODE OF BUSINESS CONDUCT The Company has adopted a code of business conduct that applies to the directors, officers, employees, representatives and agents of the Company. A copy of this code of business conduct will be provided free of charge upon request. Page 39 of 52 ITEM 11. COMPENSATION OF EXECUTIVE OFFICERS The compensation of executive officers of the Company is determined by the Board of Directors of the Company. The following table sets forth information concerning compensation received by the five most highly compensated officers of the Company for services rendered in the fiscal year ended December 31, 2003. SUMMARY COMPENSATION TABLE

There are no other executive officers whose compensation exceeds $100,000. ----------- (1) The named employee officers have participated in the Company's profit sharing, 401(k) match, deferred compensation and excess benefit programs. The aggregate payments made by the Company pursuant to such programs are listed as All Other Compensation. Page 40 of 52 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT All of the Company's issued and outstanding capital stock is owned by Holdings. The following table sets forth certain information with respect to the common and preferred equity interests of Holdings.

----------- (1) Includes shares held by employees and affiliates of CVC. (2) Includes shares of (i) voting Class A Common Stock representing 40.72% of outstanding voting Class A Common Stock, (ii) non-voting Class B Common Stock and (iii) stock warrants. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On February 19, 2003, the Company purchased the notes originally issued by Holdings from the holders for an aggregate purchase price of $3,447. These notes, which are reported at cost as notes receivable from Holdings on the accompanying 2003 consolidated balance sheet, mature November 2008. Although the Company may determine to distribute the notes to Holdings, subject to compliance with the Company's credit facility, senior subordinated notes and other debt agreements, the Company does not anticipate this will occur in the foreseeable future. Pursuant to an IRS regulation issued on August 29, 2003, the taxable income to Holdings associated with the note purchase results in a reduction to the tax basis of certain of the Company's assets and has been reflected in the accompanying consolidated financial statements as a non-cash distribution to Holdings and a decrease in deferred income tax assets. Page 41 of 52 PART IV ITEM 14. FEES PAID TO INDEPENDENT AUDITORS The following is a summary of fees billed by Ernst & Young LLP for audit and other professional services during the year ended December 31:

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) The following financial statements are included in Part 2, Item 8:

(a)(2) The following financial statement schedules are included in Item 15, Part IV of this report. Page 42 of 52 Schedule II - Valuation and Qualifying Accounts Other financial statement schedules are omitted either because of the absence of the conditions under which they are required or because the required information is contained in the consolidated financial statements or notes thereto. (b) Reports on Form 8-K None (c) Exhibits The following exhibits, except exhibit 16.1, are incorporated by reference to the Airxcel, Inc. Form S-4 Registration Statement. 3.1 Certificate of Incorporation of Airxcel, Inc., as amended. 3.2 Amended and Restated By-laws of Airxcel, Inc. 4.1 Indenture dated as of November 10, 1997 between Airxcel, Inc. and United States Trust Company of New York. 4.2 Purchase Agreement dated as of November 5, 1997 among Airxcel, Inc., Chase Securities Inc. and NationsBanc Montgomery Securities, Inc. 4.3 Exchange and Registration Rights Agreement dated as of November 10, 1997 among Airxcel, Inc., Chase Securities Inc. and NationsBanc Montgomery Securities, Inc. 10.1 Amended and Restated Credit Agreement dated as of November 10, 1997 among Airxcel, Inc. and The Chase Manhattan Bank, as Agent. 10.2 Security Agreement dated as of August 22, 1996 among Recreation Vehicle Products, Inc. and The Chase Manhattan Bank, as agent. 10.3 Security Agreement and Mortgage -- Trademarks and Patents dated as of August 22, 1996 among Recreation Vehicle Products, Inc. and The Chase Manhattan Bank, as agent. 10.4 Pledge Agreement dated as of August 22, 1996 among Recreation Vehicle Products, Inc. and The Chase Manhattan Bank, as agent. 10.5 Executive Securities Purchase Agreement dated as of November 10, 1997 by and between Airxcel Holdings, Inc. and the Purchasers. 10.6 Registration Rights Agreement dated as of August 22, 1996 by and among RV Products Holding Corp., Citicorp Venture Capital, Ltd., Citicorp Mezzanine Partners, L.P., CCT III Partners, L.P., the Executives, and the Individual Investors. 10.7 Joinder to Registration Rights Agreement dated as of November 10, 1997 by and among Airxcel Holdings, Inc., Citicorp Venture Capital, Ltd., the Existing Stockholders, and the New Executives. 10.8 Stockholders Agreement dated as of August 22, 1996, as amended by and among RV Products Holding Corp., Citicorp Venture Capital, Ltd., Citicorp Mezzanine Partners, L.P., CCT III Partners, L.P., the Executives and the Individual Investors. 10.9 Stock Purchase Warrant dated as of August 22, 1996. 10.10 Asset Purchase Agreement effective as of October 17, 1997 by and among Crispaire Corporation, Airxcel, Inc. and Airxcel Holdings, Inc. 10.11 Distribution Agreement dated as of October 11, 1995 by and between The Coast Distribution System and Recreation Vehicle Products, Inc. 10.12 Agreement dated as of October 6, 1997 by and between Crispaire Corporation and the Los Angeles Unified School District. 10.13 Agreement dated as of October 6, 1997 by and between Crispaire Corporation and the Los Angeles Unified School District.

Page 43 of 52 10.14 Agreement dated as of October 6, 1997 by and between Crispaire Corporation and the Los Angeles Unified School District. 10.15 Executive Employment Agreement dated as of November 10, 1997 by and among Airxcel, Inc. and T.K. Sellers, Jr. 10.16 Executive Employment Agreement dated as of November 10, 1997 by and among Airxcel, Inc. and George D. Wyers. 10.17 Executive Employment Agreement dated as of November 10, 1997 by and among Airxcel, Inc. and David Shuford. 10.18 Trademark License Agreement by and between the Coleman Company, Inc. and Coleman R.V. Products, Inc. dated as of May 1, 1991. 10.19 Trademark License Agreement by and between the Canadian Coleman Company, Ltd. and Coleman R.V. Products, Inc. dated as of May 1, 1997. 10.20 Second Amended and Restated Credit Agreement dated as of March 17, 1998 among Airxcel, Inc., KODA Enterprises Group, Inc., the Guarantors at any time party thereto, the Lenders named thereto and The Chase Manhattan Bank, as Agent. 10.21 Stock Purchase Agreement among William S. Karol and Airxcel, Inc. dated March 17, 1998. 16.1 Letter regarding change in certifying accountant dated May 22, 2002. 31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Page 44 of 52 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands)

--------------------- 1. Deduction for purposes for which reserve was created. Page 45 of 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Airxcel, Inc. 12-23-04 /s/ Melvin L. Adams ------------------------- --------------------------------------- Date Melvin L. Adams President & Chief Executive Officer 12-23-04 /s/ Richard L. Schreck ------------------------- --------------------------------------- Date Richard L. Schreck Secretary/Treasurer and Chief Financial Officer 12-23-04 /s/ Lawrence Jones ------------------------- --------------------------------------- Date Lawrence Jones Director 12-23-04 /s/ Dean T. DuCray ------------------------- --------------------------------------- Date Dean T. DuCray Director 12-23-04 /s/ James A. Urry ------------------------- --------------------------------------- Date James A. Urry Director 12-23-04 /s/ George D. Wyers ------------------------- --------------------------------------- Date George D. Wyers Director Page 46 of 52

AIRXCEL INC 10-K/A