Summary of DREW INDUSTRIES INC

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company has two reportable segments, the recreational vehicle products segment (the "RV Segment") and the manufactured housing products segment (the "MH Segment"). The Company's operations are conducted through its operating subsidiaries, Kinro, Inc. and its subsidiaries (collectively, "Kinro") and Lippert Components, Inc. and its subsidiaries (collectively, "Lippert"). Each has operations in both the RV and MH segments. At September 30, 2008, the Company's subsidiaries operated 36 plants in the United States.

The RV Segment accounted for 74 percent of consolidated net sales for the nine months ended September 30, 2008 and 2007. The RV Segment manufactures a variety of products used primarily in the production of recreational vehicles as follows:

· Aluminum windows and screens

· Doors

· Steel chassis

· Steel chassis parts

· Slide-out mechanisms and related power units

· Leveling devices

· Axles

· Steps

· Electric stabilizer jacks

· Bed lifts

· Suspension systems

· Ramp doors

· Thermoformed exterior panels

· Upholstered furniture

· Thermoformed bath and kitchen products

More than 90 percent of the Company's RV Segment sales are of products used in travel trailers and fifth wheel RVs. The balance represents sales of components for motorhomes, and sales of specialty trailers for hauling boats, personal watercraft, snowmobiles and equipment, as well as axles for specialty trailers. Travel trailers and fifth wheel RVs accounted for 78 percent of all RVs shipped by the industry in the first nine months of 2008, up from 61 percent in 2001.

The MH Segment, which accounted for 26 percent of consolidated net sales for the nine months ended September 30, 2008 and 2007, manufactures a variety of products used in the production of manufactured homes, and to a lesser extent, modular housing and office units, including:

· Vinyl and aluminum windows and screens

· Steel chassis

· Steel chassis parts

· Axles

· Thermoformed bath and kitchen products

Other than sales of specialty trailers, which aggregated $12 million and $16 million in the first nine months of 2008 and 2007, respectively, and $21 million in all of 2007, sales of products other than components for RVs and manufactured homes are not considered significant. However, certain of the Company's MH Segment customers produce both manufactured homes and modular homes, and certain of the products manufactured by the Company are suitable for both manufactured homes and modular homes. As a result, the Company is not always able to determine in which type of home its products are installed. Intersegment sales are insignificant.

DREW INDUSTRIES INCORPORATED

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

BACKGROUND

Recreational Vehicle Industry

An RV is a vehicle designed as temporary living quarters for recreational, camping, travel or seasonal use. RVs may be motorized (motorhomes) or towable (travel trailers, fifth wheel travel trailers, folding camping trailers and truck campers). Towable RVs represented 88 percent of the 211,900 RVs produced in the first nine months of 2008, while motorhomes represented the remaining 12 percent of RVs produced. Motorhomes have a significantly higher average retail selling price than towable RVs, and as a result, sales of motorhomes in 2007 represented approximately 50 percent of total RV retail sales dollars.

In 2007, U.S industry-wide unit retail sales of travel trailers and fifth wheel RVs, the Company's primary market, increased 2 percent, while industry-wide wholesale shipments declined 10 percent, an indication that dealers were reducing inventories. In the first nine months of 2008, industry-wide wholesale shipments of travel trailers and fifth wheel RVs declined 21 percent according to the Recreational Vehicle Industry Association ("RVIA"), while Statistical Surveys, Inc. reported that retail sales of travel trailers and fifth wheel RVs declined 20 percent for the first eight months of 2008. August 2008 is the last month for which retail information is available. Retail statistics reported by Statistical Surveys, Inc. do not include sales of RVs in Canada, however wholesale shipment statistics include shipments to Canada. The RVIA reported that nearly one in five towable RVs was shipped to Canada in 2007. Recent RV dealer surveys indicate that inventories, although below year-earlier levels, are still higher than dealers would prefer in this uncertain economic environment and in light of reduced demand.

While the Company tends to measure its RV sales against industry-wide wholesale shipment statistics, it believes the underlying health of the RV industry is determined by retail demand, which has declined throughout 2008. A comparison of the percentage change in industry-wide wholesale shipments and retail shipments of travel trailers and fifth wheel RVs for 2008 is as follows:

                                        Wholesale          Retail
              Quarter ended March 31        (8%)             (17%)
              Quarter ended June 30        (18%)             (19%)
              July                         (33%)             (26%)
              August                       (41%)             (26%)
              September                    (39%)       Not yet available

Industry-wide wholesale shipments of motorhomes, components for which represent about 5 percent of Drew's RV segment net sales, were down 42 percent during the first nine months of 2008. Retail sales of motorhomes were down 37 percent for the first eight months of 2008. August 2008 is the last month for which retail industry information is available.

For the remainder of 2008 and into 2009, the Company anticipates a weak economy, volatile fuel prices, low consumer confidence, a tight credit market, and continued weakness in the real estate and mortgage markets. All of these factors are expected to cause consumers to be extremely cautious, which in turn will likely impact the purchases of discretionary big-ticket items, such as RVs. In response to slow retail sales during 2008, RV manufacturers have significantly reduced their output, which has negatively affected the Company in 2008, and will likely continue into 2009.

DREW INDUSTRIES INCORPORATED

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

The RVIA has projected a 20 percent decline in wholesale shipments of travel trailers and fifth wheel RVs in 2008, and an additional 4 percent decline of wholesale shipments of travel trailers and fifth wheel RVs in 2009. Based upon the further decline in industry-wide wholesale shipments of travel trailers and fifth wheel RVs subsequent to the RVIA forecast, the actual decline for 2008 is likely to be greater than the 20 percent projected.

In the long-term, RV sales are expected 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 U.S. population. U.S. Census Bureau projections released in March 2004, project that there will be in excess of 20 million more people over the age of 50 by 2014.

In 1997, the RVIA began a generic advertising campaign promoting the RV lifestyle. The current phase is targeted at both parents aged 30-49 with children at home, and couples aged 50-64 with no children at home. The popularity of traveling in RVs to NASCAR and other sporting events, and using RVs as second homes, also appears to motivate consumer demand for RVs.

Manufactured Housing Industry

Manufactured homes are built entirely in a factory on permanent steel undercarriages or chassis, transported to the site, and installed pursuant to a federal building code administered by the U.S. Department of Housing and Urban Development ("HUD"). The federal standards regulate manufactured housing design and construction, strength and durability, transportability, fire resistance, energy efficiency and quality. The HUD Code also sets performance standards for the heating, plumbing, air conditioning, thermal and electrical systems. It is the only federally regulated national building code. On-site additions, such as garages, decks and porches, often add to the attractiveness of manufactured homes and must be built to local, state or regional building codes. A manufactured home may be sited on owned or leased land.

Industry-wide wholesale production of manufactured homes has declined approximately 74 percent since 1998, including an 18 percent decline in 2007, to 95,800 homes. This 74 percent decline over the past ten years was primarily the result of limited credit availability because of high credit standards applied to purchases of manufactured homes, high down payments, and high interest rate spreads between conventional mortgages for site-built homes and chattel loans for manufactured homes (chattel loans are loans secured only by the home which is sited on leased land).

The Institute for Building Technology and Safety ("IBTS") reported that for the nine months ended September 30, 2008, industry-wide wholesale production of manufactured homes decreased 10 percent over the same period in the prior year, including a 16 percent decrease in larger, multi-section homes produced by the industry, partially offset by a 4 percent increase in smaller, single-section homes, in which the Company has less average content per home. However, over the past 3 months, production of single-section manufactured homes has declined by 6 percent, largely offsetting the positive comparisons from earlier in 2008. For the first nine months of 2008, multi-section homes represented 63 percent of the total homes produced, down from 69 percent for the same period last year, and 80 percent in all of 2003.

DREW INDUSTRIES INCORPORATED

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

The decline in multi-section homes over the past few years was apparently partly due to the weak site-built housing market, as a result of which many retirees have not been able to sell their primary residence, or may have been unwilling to sell at currently depressed prices, and purchase a more affordable manufactured home. In the several years leading up to 2007, many traditional buyers of manufactured homes were instead able to purchase site-built homes, as subprime mortgages were readily available at unrealistic terms.

The Company believes that long-term growth prospects for manufactured housing are positive because of (i) the quality and affordability of the home, (ii) the favorable demographic trends, including the increasing number of retirees, who, in the past had represented a significant market for manufactured homes, (iii) pent-up demand by retirees who have been unable or unwilling to sell their primary residence and purchase a manufactured home, and (iv) the unavailability of subprime mortgages for site-built homes. In addition, legislation enacted in July 2008 increased FHA insured lending limits for chattel mortgages for manufactured homes from less than $49,000 to nearly $70,000, and provides a tax credit for up to $7,500 for first-time homebuyers, which could increase demand for new manufactured homes. While these factors point to the potential for future growth, because of the current real estate and economic environment, low consumer confidence, and tight credit markets, the Company currently expects wholesale production of manufactured homes to continue to decline for the balance of 2008.

RESULTS OF OPERATIONS

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

                                   Nine Months Ended        Three Months Ended
                                     September 30,             September 30,
                                    2008         2007         2008         2007
Net sales:
RV Segment                       $  320,941   $ 390,193   $    85,694   $ 127,156
MH Segment                          113,004     140,617        38,580      46,254
Total net sales                  $  433,945   $ 530,810   $   124,274   $ 173,410

Operating profit:
RV Segment                       $   31,848   $  53,128   $     4,598   $  17,007
MH Segment                           10,989      12,153         3,913       4,047
Total segment operating profit       42,837      65,281         8,511      21,054
Amortization of intangibles          (3,670 )    (3,014 )      (1,547 )    (1,111 )
Corporate                            (5,714 )    (5,801 )      (1,747 )    (1,884 )
Other items                           1,561        (674 )        (687 )       195
Total operating profit           $   35,014   $  55,792   $     4,530   $  18,254

Consolidated Highlights

§ Net sales for the third quarter of 2008, excluding the impact of sales price increases and acquisitions, decreased $66 million (38 percent) from the third quarter of 2007, primarily as a result of the 38 percent decline in industry-wide wholesale shipments of travel trailers and fifth wheel RVs in the third quarter of 2008, as well as a 15 percent decline in industry wholesale shipments of manufactured homes. In addition, 2008 third quarter sales were negatively affected by the 62 percent decline in industry-wide wholesale shipments of motorhomes, and the severe industry-wide decline in sales of small and medium sized boats, particularly on the West Coast, for which the Company supplies specialty trailers.

DREW INDUSTRIES INCORPORATED

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

§ Net income for the third quarter of 2008 decreased 77 percent from the third quarter of 2007, primarily due to the decrease in net sales and higher raw material costs.

§ Facility consolidations and fixed overhead reductions improved operating profit in the third quarter of 2008 by approximately $1.1 million, compared to the third quarter of 2007, and are expected to improve operating profit by over $5 million for all of 2008 as compared to 2007. These fixed cost reductions are expected to further benefit 2009 operating profit as compared to 2008 by over $1 million.

§ On July 1, 2008, Lippert acquired certain assets and the business of Seating Technology, Inc. and its affiliated companies ("Seating Technology"). Seating Technology had annual sales of $40 million in 2007. The purchase price was $28.4 million, which was financed from available cash. Seating Technology manufactures a wide variety of furniture products primarily for towable RVs, including folding sofas for toy hauler RVs, a full line of upholstered furniture, mattresses, decorative pillows, wood-backed valances and quilted soft good products. This acquisition has added an entirely new product line for the Company. Lippert is in the process of closing two of Seating Technology's five leased facilities in Indiana, and consolidating those operations into existing facilities.

§ Steel and aluminum are among the Company's principal raw materials. Since late 2007, the cost of steel and aluminum has been volatile. Assuming the cost of raw materials remains at the current escalated levels, the Company's cost of sales would increase by approximately $40 million on an annualized basis. Although the Company was able to raise sales prices, the higher cost raw materials, net of sales price increases, reduced 2008 third quarter earnings by approximately $0.06 to $0.08 per diluted share. Raw material costs have recently declined from their peak levels, largely due to the global economic downturn, but remain well above prior-year levels. However, the Company still has higher priced raw materials in inventory, which will adversely impact operating results for the fourth quarter of 2008, although the impact is estimated to be less than it was in the third quarter of 2008.

The Company has implemented sales price increases to customers to offset most of the effect of raw material cost increases. While the Company has historically been able to obtain sales price increases to almost fully offset raw material cost increases, there can be no assurance that future cost increases, if any, can be partially or fully passed on to customers. The Company also continues to explore improved product design, efficiency improvements, and alternative sources of raw materials and components, both domestic and imported.

DREW INDUSTRIES INCORPORATED

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

RV Segment - Third Quarter

Net sales of the RV Segment in the third quarter of 2008 decreased 33 percent, or $41 million, as compared to the third quarter of 2007 due to:

· An organic sales decline of approximately $51 million, or 42 percent, of RV-related products. This 42 percent decline was due largely to the 38 percent decrease in industry-wide wholesale shipments of travel trailers and fifth wheel RVs, the Company's primary RV market. Industry-wide wholesale shipments of motorhomes, components for which represent about 5 percent of the Company's RV segment net sales, were down 62 percent during the third quarter of 2008.

· An organic sales decline of approximately $3 million in specialty trailers, due primarily to a severe industry-wide decline in sales of small and medium size boats, particularly on the West Coast, the Company's primary specialty trailer market.

Partially offset by:

· Sales generated from 2008 acquisitions aggregating approximately $7 million.

· Sales price increases of approximately $5 million, primarily due to raw material cost increases.

The Company's average product content per type of RV, calculated based upon the Company's net sales of components for the different types of RVs, for the twelve months ended September 30, divided by the industry-wide wholesale shipments of the different types of RVs for the twelve months ended September 30, was as follows:

                                                  2008      2007      Percent Change
Content per Travel Trailer and Fifth Wheel RVs   $ 1,889   $ 1,673          13%
Content per Motorhomes                           $   554   $   403          37%
Content per all RVs                              $ 1,528   $ 1,295          18%

The above product content per travel trailer and fifth wheel RV for the twelve months ended September 30, 2008 includes historical sales results for acquisitions, under the assumption the acquisitions had been completed at the beginning of that twelve-month period. Sales of certain RV components have been reclassified between travel trailer and fifth wheel RVs and motorhomes in prior periods.

According to the RVIA, industry production for the twelve months ended September 30, was as follows:

                                       2008        2007       Percent Change
Travel Trailer and Fifth Wheel RVs     218,900     261,600         (16)%
Motorhomes                              37,300      55,900         (33)%
All RVs                                284,200     355,500         (20)%

DREW INDUSTRIES INCORPORATED

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Operating profit of the RV Segment in the third quarter of 2008 decreased 73 percent to $4.6 million due to the decline in sales, as well as a decrease of 8.0 percent in the operating profit margin to 5.4 percent of net sales in the third quarter of 2008 from 13.4 percent of net sales in the third quarter of 2007. Excluding sales price increases, the decline in RV Segment operating profit was 26 percent of the decline in net sales, which is higher than we would typically expect, largely due to the impact of increased raw material costs.

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

· Higher raw material costs.

· Labor inefficiencies due to the sharp drop in sales.

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

· Higher health insurance costs.

· Higher than expected integration costs of the Seating Technology acquisition, and costs incurred for prototype expenses for potential new customer accounts. New customer accounts have already been gained.

· An increase in selling, general and administrative expenses to 12.5 percent of net sales in the third quarter of 2008 from 11.0 percent of net sales in the third quarter of 2007, largely due to an increase in bad debt expense, and higher fuel and delivery costs, as well as the spreading of fixed administrative costs over a smaller sales base. This was partially offset by lower incentive compensation as a percent of net sales due to reduced operating profit margins.

Partially offset by:

· Implementation of cost-cutting measures.

· Lower overtime, supplies and repair costs.

As a result of the continued downturn in industry shipments of RVs and small and medium sized boats, during the third quarter of 2008, the Company conducted an impairment analysis on these operations. The estimated fair value of these operations currently exceeds the corresponding book values, thus no impairment has been recorded. However, a continued downturn in these industries, in particular small and medium sized boats, or in the profitability of the Company's operations, could result in a non-cash impairment charge for goodwill and other intangible assets in the future. At September 30, 2008, the Company had $10.7 million of goodwill and other intangible assets related to its marine and leisure operation, which sells trailers and axles for small and medium sized boats.

RV Segment - Year to Date

Net sales of the RV Segment in the first nine months of 2008 decreased 18 percent, or $69 million, as compared to the same period in 2007 due to:

· An organic sales decline of approximately $82 million, or 22 percent, of RV related products. This 22 percent decline was due largely to the 21 percent decrease in industry-wide wholesale shipments of travel trailers and fifth wheel RVs. Industry-wide wholesale shipments of motorhomes, components for which represent about 5 percent of the Company's RV segment net sales, were down 42 percent during the first nine months of 2008.

DREW INDUSTRIES INCORPORATED

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

· An organic sales decline of approximately $11 million in specialty trailers, due primarily to a severe industry-wide decline in sales of small and medium size boats, particularly on the West Coast, the Company's primary specialty trailer market.

Partially offset by:

· Sales generated from 2007 and 2008 acquisitions aggregating approximately $15 million.

· Sales price increases of approximately $9 million, primarily due to raw material cost increases.

Operating profit of the RV Segment in the first nine months of 2008 decreased 40 percent to $31.8 million due to the decline in sales, as well as a decrease of 3.7 percent in the operating profit margin to 9.9 percent of net sales in the first nine months of 2008 from 13.6 percent of net sales in the comparable period of 2007.

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

· Higher raw material costs.

· Labor inefficiencies due to the sharp drop in sales.

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

· Higher health insurance costs.

· An increase in selling, general and administrative expenses to 12.1 percent of net sales in the first nine months of 2008 from 11.1 percent of net sales in the same period of 2007, largely due to an increase in bad debt expense, and higher fuel and delivery costs, as well as the spreading of fixed administrative costs over a smaller sales base. This was partially offset by lower incentive compensation as a percent of net sales due to reduced operating profit margins.

Partially offset by:

· Implementation of cost-cutting measures.

· Lower overtime and warranty costs.

MH Segment - Third Quarter

Net sales of the MH Segment in the third quarter of 2008 decreased 17 percent, or $8 million, from the third quarter of 2007. Excluding $4 million in sales price increases, net sales of the MH Segment declined 26 percent, compared to a 15 percent decrease in industry-wide production of manufactured homes. The organic decrease in sales of the Company's MH Segment was greater than the manufactured housing industry decline due partly to a reduction in the average size of the homes produced by the manufactured housing industry, which require less of the Company's products, and partly due to business the Company exited in the latter half of 2007 because of inadequate margins. The Company recently received an order to supply certain components for more than 2,500 park model homes being purchased by FEMA. This should result in incremental sales in excess of $5 million through early 2009.

DREW INDUSTRIES INCORPORATED

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Manufactured homes contain one or more "floors" or sections which can be joined to make larger homes. The Company's average product content per manufactured home produced by the industry and total manufactured home floors produced by the industry, calculated based upon the Company's net sales of components for manufactured homes for the twelve months ended September 30, divided by the number of manufactured homes and manufactured home floors produced by the industry, respectively, for the twelve months ended September 30, was as follows:

. . .