Monaco Coach Corporation Reports Fourth Quarter and 2006 Fiscal Year End Results

COBURG, Ore., Feb. 8 /PRNewswire-FirstCall/ -- Monaco Coach Corporation , one of the nation's leading manufacturers of recreational vehicles, today announced results for the fourth quarter and fiscal year ended December 30, 2006.

(Logo: http://www.newscom.com/cgi-bin/prnh/19991018/MONACO )

Revenues for the fourth quarter 2006 were $299.2 million, or 2.2% lower compared to $306.0 million in revenues for the fourth quarter 2005. Fourth quarter 2006 revenues included $34.0 million in contribution from R-Vision and no FEMA sales. Fourth quarter 2005 revenues included $30.2 million in revenue from FEMA units sold and $17.6 million in revenue from R-Vision, which was acquired in November 2005. Gross profit for the period was $27.1 million, down from $31.3 million a year ago. The Company reported an operating loss for the recent fourth quarter of $512,000 compared to operating income of $4.0 million for the fourth quarter a year ago. The Company reported a net loss of $562,000, or $0.02 per diluted share, for the fourth quarter 2006. This compares to net income of $2.5 million, or $0.08 per diluted share, for the fourth quarter 2005.

For the fiscal year ended December 30, 2006, Monaco Coach reported revenues of $1.3 billion, including $208.6 million in R-Vision revenue, an overall increase of 5.0% compared to 2005 revenues of $1.2 billion. Gross profit for the year was $124.5 million, compared to $124.8 million for 2005. Operating income for the year was $3.8 million versus $7.2 million for 2005. Net income for 2006 was $1.0 million, compared to $2.6 million earned in 2005. Earnings were $0.03 per diluted share compared to $0.09 per diluted share for 2005.

Kay Toolson, Chairman and Chief Executive Officer of Monaco Coach Corporation, stated, "While we are not satisfied with our results for the fourth quarter, we are encouraged by the progress our company has made in light of current market conditions, and we remain cautiously optimistic about 2007. We are pleased to have finished with year-over-year increases in legacy towable and motorized RV shipments for the fourth quarter. The motorhome division is also showing positive trends at the retail level for the first time in over a year. Improvements in our motorized manufacturing efficiencies, as a result of the changes we made in the second and third quarters of 2006, were very encouraging. While expenses associated with these changes impacted the second and third quarters, we have witnessed benefits in the fourth quarter and expect to generate further gains in 2007."

"One of the significant changes we made in 2006 was the reconfiguration of our motorized production lines," said Toolson. "This modification reduced the number of lines producing motorhomes from seven to five and allowed us to produce more similarly priced products on each line, which in turn has given us greater flexibility in adjusting our production mix to meet demand for individual models."

"This change along with the recent improvement in wholesale and retail activity has resulted in a stronger order position," continued Toolson. "Our improved position has translated into modest increases in production run rates, and combining this with our low finished goods inventory, we believe that we are doing a much better job of matching our production level with wholesale and retail demand, which we believe should continue to reduce the need for incentives to move our products through the distribution channel."

Fourth quarter SG&A expenses of $27.6 million were 3.2% higher compared to $26.7 million reported for the fourth quarter 2005. Sequentially, however, SG&A expenses declined 6.4% from $29.5 million reported in the third quarter 2006, primarily as a result of a decline in settlement expense, stock-based compensation, and show and rally expenses. Stock-based compensation was the primary contributor to an increase of SG&A expenses to $120.5 million for 2006, compared to $113.2 million in 2005.

The Company reported finished goods inventory of $26.8 million at year end, down from $50.2 million at the end of the third quarter of 2006. The balance outstanding on our line of credit was also reduced from $9.4 million at the end of the third quarter 2006 to $2.0 million at year end.

Motorized Recreational Vehicle Segment

The Motorized RV Segment reported net sales of $240.9 million during the fourth quarter, an increase of 8.6% compared to $221.9 million for the fourth quarter 2005. Total units shipped for the quarter were 1,392, an increase of 5.7% compared to the comparable period in 2005.

The Motorized RV Segment reported gross profit of $19.7 million, or 8.2% of net sales, in the fourth quarter of 2006, compared to $21.2 million, or 9.6% of net sales, in the fourth quarter 2005. The Company reported an operating loss in the segment of $31,000 in the fourth quarter of 2006 compared to operating income of $1.5 million for the fourth quarter 2005.

"Internal retail reporting shows retail sales up over 15% for January 2007. This is a positive indicator for this segment of the business in the first quarter," said John Nepute, President of Monaco Coach Corporation. "We are also encouraged by dealers' positive acceptance of our 2007 models introduced at the November 2006 Louisville RV Show."

Net sales for the Motorized RV Segment for 2006 were $941.7 million, a 7.4% decrease over net sales of $1.0 billion for 2005. Gross profit for the recent year was $72.5 million, or 7.7% of net sales, compared to $92.8 million, or 9.1% of net sales, in 2005. The reported operating loss for the period was $6.2 million as compared to an operating loss of $1.1 million for 2005. There were 5,756 units sold in 2006, compared to 6,221 in 2005.

Towable Recreational Vehicle Segment

The Towable RV Segment reported net sales of $50.3 million during the fourth quarter, a 34.5% decrease compared to $76.7 million for the fourth quarter 2005. Gross profit for the segment was $2.2 million, or 4.4% of net sales. Gross profit for the fourth quarter 2005 was $5.7 million, or 7.5% of net sales. Operating loss for the fourth quarter was $2.9 million compared to operating income of $917,000 for the fourth quarter 2005. Fourth quarter 2006 towable units sold were 2,781, compared to 2,343 in the fourth quarter 2005, not including 2,595 FEMA units sold during the fourth quarter 2005. Fourth quarter 2006 included 1,843 towable units sold by R-Vision, compared to 1,260 for the six weeks that the Company owned R-Vision in the fourth quarter 2005.

"The decline in the towable segment for the fourth quarter 2006 when compared to the fourth quarter 2005 was mainly created by the $30.2 million in emergency living unit (FEMA unit) sales recorded in the fourth quarter 2005, the increased demand for conventional towable units, which also were deployed for the hurricane relief efforts in 2005, and a decline in R-Vision shipments," said Nepute. "Without the significant benefit from FEMA sales in 2006, margins and operating profits were lower compared to the fourth quarter 2005."

"The overall towable market has been extremely competitive, particularly at the beginning of the fourth quarter. However, we're encouraged by our results at the Louisville show where the completely redesigned interiors of several models for the Holiday Rambler and McKenzie brands received great reviews by our dealers, and R-Vision reported a record number of orders," noted Nepute. "We anticipate that the improvements to these models which are in the value-priced segment of the towable market will positively influence sales in 2007."

Net sales for the Towable RV Segment for 2006 were $324.3 million, compared to net sales of $185.4 million for 2005. Gross profit for the recent year was $31.5 million, or 9.7% of net sales, compared to $11.2 million, or 6.0% of net sales, for 2005. Operating income was $1.4 million in 2006 versus an operating loss of $2.0 million for 2005. There were 19,861 units sold in 2006, compared to 9,337 in 2005, including 1,260 units sold by R-Vision in 2005 and 13,740 in 2006.

Motorhome Resorts Segment

Net sales for the Motorhome Resorts Segment in the fourth quarter were $8.0 million, an increase of 8.8% compared to $7.3 million for the fourth quarter 2005. Gross profit for the Motorhome Resorts Segment was $5.1 million in the fourth quarter compared to $4.3 million for the fourth quarter 2005. The Company reported operating income in this segment of $2.4 million in the fourth quarter compared to operating income of $1.6 million for the fourth quarter 2005.

"While we are pleased that the Motorhome Resorts Segment continues to generate positive operating margins, we were disappointed in the level of sales in the fourth quarter. The shortfall was due primarily to construction around the Las Vegas project impeding entrance to the resort, poor weather, and sales in escrow that didn't close prior to year end due to holiday scheduling," said Nepute. "We anticipate that these lot sales will flow into the first quarter, and we still anticipate selling all available lots at our two existing resorts in the first half of 2007. Plans are also progressing as scheduled on our two future development sites in Naples, Fla. and La Quinta, Calif."

Net sales for the Motorhome Resorts Segment for 2006 were $32.0 million, down from sales of $33.0 million for 2005. Gross profit for this segment was $20.5 million in 2006, compared to $20.8 million for 2005. Operating income was $8.6 million for 2006, down from $10.3 million for 2005.

2007 Business Outlook

Marty Daley, Monaco Coach Corporation Vice President and Chief Financial Officer, stated, "The franchise program continues to gain acceptance with our dealer partners along with other initiatives, including Monaco Financial Services and Monaco Extended Care Warranty programs. We believe the Company is uniquely positioned to provide a full array of products and services that will enable our dealer partners to attract more customers and generate more profits."

"Provided there are no material changes in the marketplace, we expect revenues in the range of $1.37 billion to $1.45 billion in 2007. However, the leveling off of interest rates, lower fuel prices and recent gains in equity markets have traditionally been positive drivers for the RV markets," said Daley.

"Capacity utilization in our plants remains a challenge and is still lower than desired. We will continue to address this issue as we target ways to increase our gross profit margin. We expect fiscal 2007 gross margin to be between 10.05% and 10.25%. Selling, general and administrative expenses in fiscal 2007 are expected to be between 8.35% and 8.2%," Daley added.

Conference Call to be Held

Monaco Coach Corporation will conduct a conference call in conjunction with this news release at 2:00 p.m. Eastern Time on Thursday, February 8, 2007. Members of the news media, investors, and the general public are invited to access a live broadcast of the conference call via the Investor Relations page of the Company's website at http://www.monaco-online.com/. The conference call will be archived and available for replay for the next 90 days.

About Monaco Coach Corporation

Dedicated to quality and service, Monaco Coach Corporation is one of the nation's leading manufacturers of motorized and towable recreational vehicles. Headquartered in Coburg, Oregon, with substantial manufacturing facilities in Indiana, Monaco Coach employs approximately 5,400 people. The Company offers entry-level priced towable RVs up to custom made luxury recreational vehicle models under the Monaco, Holiday Rambler, Safari, Beaver, McKenzie, R-Vision and Dodge brand names. Monaco Coach maintains RV service centers in Harrisburg, Ore., Elkhart, Ind., and Wildwood, Fla.

Ranked as the number one manufacturer of diesel powered motorhomes, Monaco Coach is a leader in innovative RVs designed to meet the needs of a broad range of customers with varied interests. Monaco Coach Corporation stock trades on the New York Stock Exchange under the symbol "MNC," and the Company is included in the S&P Small-Cap 600 stock index. For additional information about Monaco Coach Corporation, please visit http://www.monaco-online.com/ or http://www.trail-lite.com/.

The statements above regarding the Company's expectation for further gains in fiscal 2007 as a result of improved manufacturing efficiencies, increases in retail sales in the Motorhome Resorts Segment in the first quarter of fiscal 2007, improved prospects for the Motorized RV Segment in fiscal 2007, sales of remaining available lots at the Company's existing resorts in the first half of fiscal 2007, and in the "2007 Business Outlook" section regarding improving retail sales and expectations for revenues, gross profit margin and SG&A expenses in fiscal 2007 are forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from these statements, including unforeseen declines in the wholesale and retail markets for recreational vehicles, consumers' preference for certain models and resort lots, failure to realize gains from the motorized manufacturing efficiencies as anticipated, a decline in consumer confidence, an increase in interest rates affecting retail and wholesale financing, an increase in price or availability of fuel, and a downturn in the equity markets. Please refer to the Company's SEC reports for additional risks and uncertainties, including but not limited to the most recent Form 10-Q, the annual report on Form 10-K for 2005, and the 2005 Annual Report to Shareholders for additional factors. These filings can be accessed over the Internet at http://www.sec.gov/.

CONTACT: Craig Wanichek Director of Investor Relations Monaco Coach Corporation (541) 681-8029 craig.wanichek@monacocoach.com MONACO COACH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited: dollars in thousands) December 31, December 30, 2005 2006 ASSETS Current assets: Cash $586 $4,984 Trade receivables, net 102,666 81,588 Inventories 183,292 155,871 Resort lot inventory 9,135 7,997 Prepaid expenses 4,364 5,624 Income taxes receivable 206 6,901 Deferred income taxes 36,345 38,038 Discontinued operations 4,922 0 Total current assets 341,516 301,003 Property, plant, and equipment, net 159,304 153,895 Land held for development 0 16,300 Debt issuance costs net of accumulated amortization of $678, and $912, respectively 695 540 Goodwill 85,952 86,412 Total assets $587,467 $558,150 LIABILITIES Current liabilities: Book overdraft $14,550 $16,626 Current portion of long-term debt 5,714 5,714 Line of credit 25,000 2,036 Accounts payable 78,299 72,591 Product liability reserve 19,275 15,764 Product warranty reserve 32,902 33,804 Accrued expenses and other liabilities 37,732 44,364 Discontinued operations 853 298 Total current liabilities 214,325 191,197 Long-term debt, less current portion 34,786 29,071 Deferred income taxes 21,624 21,678 Other long-term liabilities 0 883 Total liabilities 270,735 242,829 STOCKHOLDERS' EQUITY Preferred stock, $.01 par value; 1,934,783 shares authorized, no shares outstanding Common stock, $.01 par value; 50,000,000 shares authorized, 29,561,766 and 29,769,356 issued and outstanding, respectively 296 298 Additional paid-in capital 59,005 63,722 Retained earnings 257,431 251,301 Total stockholders' equity 316,732 315,321 Total liabilities and stockholders' equity $587,467 $558,150 MONACO COACH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited: dollars in thousands, except share and per share data) Quarter Ended Year Ended December December December December 31, 30, 31, 30, 2005 2006 2005 2006 Net sales $305,960 $299,163 $1,236,238 $1,297,986 Cost of sales 274,692 272,092 1,111,468 1,173,443 Gross profit 31,268 27,071 124,770 124,543 Selling, general, and administrative expenses 26,728 27,583 113,179 120,465 Plant relocation costs 538 0 4,370 269 Operating income (loss) 4,002 (512) 7,221 3,809 Other income, net 100 108 255 615 Interest expense (878) (932) (1,820) (4,430) Income (loss) before income taxes and discontinued operations 3,224 (1,336) 5,656 (6) Provision for (benefit from) income taxes, continuing operations 1,229 (649) 1,687 (992) Net income (loss) from continuing operations 1,995 (687) 3,969 986 Income (loss) from discontinued operations, net of tax provision (benefit) 538 125 (1,321) 18 Net income (loss) $2,533 $(562) $2,648 $1,004 Earnings (loss) per common share: Basic from continuing operations $0.07 $(0.02) $0.13 $0.03 Basic from discontinued operations 0.02 0.00 (0.04) 0.00 Basic $0.09 $(0.02) $0.09 $0.03 Diluted from continuing operations $0.06 $(0.02) $0.13 $0.03 Diluted from discontinued operations 0.02 0.00 (0.04) 0.00 Diluted $0.08 $(0.02) $0.09 $0.03 Weighted average common shares outstanding: Basic 29,559,553 29,760,969 29,516,794 29,712,957 Diluted 29,844,209 30,018,115 29,858,036 29,902,830 MONACO COACH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited: dollars in thousands) Year Ended December 31, December 30, 2005 2006 Increase (Decrease) in Cash: Cash flows from operating activities: Net income from continuing operations $2,648 $1,004 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of assets 276 14 Depreciation and amortization 10,678 14,177 Stock-based compensation expense 16 2,759 Deferred income taxes (2,943) (1,900) Changes in working capital accounts: Trade receivables, net 39,203 21,078 Inventories (2,916) 27,421 Resort lot inventory 145 1,138 Land held for development 0 (16,300) Prepaid expenses 1,422 (1,270) Accounts payable (5,947) (5,708) Product liability reserve (1,619) (3,689) Product warranty reserve (4,486) 902 Income taxes receivable (2,293) (6,664) Deferred revenue 0 883 Accrued expenses and other liabilities 805 7,151 Discontinued operations (662) 4,271 Net cash provided by operating activities 34,327 45,267 Cash flows from investing activities: Additions to property, plant, and equipment (17,718) (9,324) Payment for business acquisition, net of cash acquired (54,601) 0 Proceeds from sale of assets 123 215 Discontinued operations (4) 0 Net cash used in investing activities (72,200) (9,109) Cash flows from financing activities: Book overdraft 12,475 2,076 Payments on lines of credit, net (9,062) (22,964) Borrowings (payments) on long-term notes payable 40,500 (5,715) Debt issuance costs (298) (79) Dividends paid (7,085) (7,134) Tax benefit of stock options exercised 0 161 Issuance of common stock 1,537 1,799 Discontinued operations 392 96 Net cash provided by (used in) financing activities 38,459 (31,760) Net change in cash 586 4,398 Cash at beginning of period 0 586 Cash at end of period $586 $4,984 Monaco Coach Corporation Segment Reporting (Unaudited: dollars in thousands) Results of Consolidated Operations Quarter Quarter Ended Ended December 31, % of December 30, % of 2005 Sales 2006 Sales Net sales $305,960 100.00% $299,163 100.00% Cost of sales 274,692 89.78% 272,092 90.95% Gross profit 31,268 10.22% 27,071 9.05% Selling, general and administrative expenses 26,728 8.74% 27,583 9.22% Plant relocation costs 538 0.18% -- 0.00% Operating income (loss) 4,002 1.31% (512) -0.17% Other income and interest expense 778 0.25% 824 0.28% Income (loss) before income taxes and discontinued operations 3,224 1.05% (1,336) -0.45% Provision for (benefit from) income taxes, continuing operations 1,229 0.40% (649) -0.22% Net income (loss) from continuing operations 1,995 0.65% (687) -0.23% Income (loss) from discontinued operations, net of tax provision 538 0.18% 125 0.04% Net income (loss) $2,533 0.83% $(562) -0.19% Year Year Ended Ended December 31, % of December 30, % of 2005 Sales 2006 Sales Net sales $1,236,238 100.00% $1,297,986 100.00% Cost of sales 1,111,468 89.91% 1,173,443 90.40% Gross profit 124,770 10.09% 124,543 9.60% Selling, general and administrative expenses 113,179 9.16% 120,465 9.28% Plant relocation costs 4,370 0.35% 269 0.02% Operating income (loss) 7,221 0.58% 3,809 0.29% Other income and interest expense 1,565 0.13% 3,815 0.29% Income (loss) before income taxes and discontinued operations 5,656 0.46% (6) 0.00% Provision for (benefit from) income taxes, continuing operations 1,687 0.14% (992) -0.08% Net income (loss) from continuing operations 3,969 0.32% 986 0.08% Income (loss) from discontinued operations, net of tax provision (1,321) -0.11% 18 0.00% Net income (loss) $2,648 0.21% $1,004 0.08% Motorized Recreational Vehicle Segment Quarter Quarter Ended Ended December 31, % of December 30, % of 2005 Sales 2006 Sales Net sales $221,942 100.00% $240,929 100.00% Cost of sales 200,693 90.43% 221,200 91.81% Gross profit 21,249 9.57% 19,729 8.19% Selling, general and administrative expenses 9,816 4.42% 17,747 7.37% Corporate overhead allocation 9,393 4.23% 2,013 0.84% Plant relocation costs 538 0.24% -- 0.00% Operating income (loss) $1,502 0.68% $(31) -0.01% Year Year Ended Ended December 31, % of December 30, % of 2005 Sales 2006 Sales Net sales $1,017,766 100.00% $941,657 100.00% Cost of sales 925,014 90.89% 869,110 92.30% Gross profit 92,752 9.11% 72,547 7.70% Selling, general and administrative expenses 46,331 4.55% 44,306 4.71% Corporate overhead allocation 43,148 4.24% 34,172 3.63% Plant relocation costs 4,370 0.43% 269 0.03% Operating income (loss) $(1,097) -0.11% $(6,200) -0.66% Towable Recreational Vehicle Segment Quarter Quarter Ended Ended December 31, % of December 30, % of 2005 Sales 2006 Sales Net sales $76,680 100.00% $50,250 100.00% Cost of sales 70,937 92.51% 48,037 95.60% Gross profit 5,743 7.49% 2,213 4.40% Selling, general and administrative expenses 1,763 2.30% 4,612 9.18% Corporate overhead allocation 3,063 3.99% 495 0.99% Operating income (loss) $917 1.20% $(2,894) -5.76% Year Year Ended Ended December 31, % of December 30, % of 2005 Sales 2006 Sales Net sales $185,433 100.00% $324,342 100.00% Cost of sales 174,242 93.96% 292,876 90.30% Gross profit 11,191 6.04% 31,466 9.70% Selling, general and administrative expenses 5,603 3.02% 15,323 4.72% Corporate overhead allocation 7,588 4.09% 14,737 4.54% Operating income (loss) $(2,000) -1.08% $1,406 0.43% Motorhome Resorts Segment Quarter Quarter Ended Ended December 31, % of December 30, % of 2005 Sales 2006 Sales Net sales $7,338 100.00% $7,984 100.00% Cost of sales 3,062 41.73% 2,855 35.76% Gross profit 4,276 58.27% 5,129 64.24% Selling, general and administrative expenses 1,855 25.28% 2,438 30.54% Corporate overhead allocation 838 11.42% 278 3.48% Operating income $1,583 21.57% $2,413 30.22% Year Year Ended Ended December 31, % of December 30, % of 2005 Sales 2006 Sales Net sales $33,039 100.00% $31,987 100.00% Cost of sales 12,212 36.96% 11,457 35.82% Gross profit 20,827 63.04% 20,530 64.18% Selling, general and administrative expenses 7,606 23.02% 8,236 25.75% Corporate overhead allocation 2,903 8.79% 3,691 11.54% Operating income $10,318 31.23% $8,603 26.90%