Monaco Coach Corporation Reports Second Quarter Profits

COBURG, Ore., July 25 /PRNewswire-FirstCall/ -- Monaco Coach Corporation , one of the nation's leading manufacturers of recreational vehicles, today reported revenues and earnings for the second quarter ended June 30, 2007.

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Second quarter 2007 revenues were $335.3 million, up 4.4% compared to $321.3 million in revenues for the second quarter of 2006. The Company reported a higher gross profit of $36.6 million for the second quarter of 2007, compared to $30.5 million a year ago. Operating income for the second quarter of 2007 was $8.7 million, compared to $793,000 for the second quarter of 2006. Net income for the second quarter of 2007 was $4.5 million, compared to $372,000 a year ago. For the second quarter of 2007, diluted earnings per share were $0.15 versus $0.01 for the same period last year.

For the six months ended June 30, 2007, revenues were $657.6 million, compared to $706.4 million for the first half of 2006. The Company reported net income of $6.0 million for the recent six-month period, compared to $8.7 million for the same period in 2006. Earnings per share on a diluted basis for the first six months of 2007 were $0.20, compared to $0.29 for the same period last year.

"Our Class A retail results remained positive, despite continuing challenges in the domestic motorhome market," said Kay Toolson, Chairman and Chief Executive Officer of Monaco Coach Corporation. "Internal reports show our Class A business was up over 6% year-to-date through the quarter, compared to the overall Class A market, which was down 6.6% through May, according to the most recently reported industry data. These market share gains, along with improving margins and steady consumer demand through the first six months of 2007 in the motorhome segment, has strengthened our confidence in the retail market for our products. Improvements in our towable product line-up are helping us gain back market share in this segment. Our overall business approach remains one of flexibility and sensitivity to changing economic conditions, consumer confidence and retail sell-through."

Gross profit margin for the Company increased in the second quarter of 2007 to 10.9%, compared to 9.5% in the second quarter of 2006. The higher gross profit margin was due to reductions in wholesale discounting, improvements in plant utilization, and additional savings in some direct costs. These improvements offset higher material costs due to changes in product mix, as the Company grew its output of mid-priced diesel products.

"Our June Dealer Congress was a significant success," stated John Nepute, President of Monaco Coach Corporation. "Dealers were very positive on our new 2008 models. Like our dealers, we expect our 2008 product line-up to be extremely popular with our retail customers."

"We have paid close attention to retail demand, and that has enabled us to consistently build the proper mix of models for our dealer partners and manage our level of finished goods inventory. The equilibrium created has lessened the need to provide discounts or special incentives," said Nepute. "Additionally, as expected, the changes and moves we made in our production configuration and capacity last year have helped us become more efficient in our manufacturing processes. We expect to see further plant efficiencies associated with the consolidation of towable manufacturing from Elkhart to two existing facilities in the fourth quarter of 2007."

For the second quarter of 2007, selling, general and administrative expenses were reduced by 5.3% to $27.9 million, compared to $29.4 million for the second quarter of 2006.

"Reductions in retail promotional activity and settlement and legal costs positively impacted selling, general and administrative expenses as compared to the second quarter last year," said Nepute. "In addition, selling, general and administrative expenses for the second quarter of 2007 dropped 13.9%, compared to the first quarter of 2007. This improvement was helped by the timing of our stock-based compensation expense which was more heavily weighted in the first quarter of 2007 and the result of a one-time change in our Franchise for the Future program."

Motorized Recreational Vehicle Segment

Motorized sales of $250.7 million in the second quarter of 2007 increased 11.1% compared to $225.6 million in the second quarter of 2006. As reported by Statistical Surveys, Inc., Monaco Coach Corporation had a 6.3% increase in market share year-to-date through May 2007 for motorhome retail registrations, while industry-wide there was a decline of 7.9% in motorhome registrations for the same period.

Segment gross profit for the second quarter of 2007 was $26.3 million, or 10.5% of sales, compared to $15.9 million, or 7.0% of sales, for the second quarter of 2006. Operating income for the quarter was $6.2 million, or 2.5% of sales, compared to an operating loss of $3.2 million in the second quarter of 2006.

Unit sales of the Motorized RV Segment for the quarter ended June 30, 2007 totaled 1,518, up 7.8% from 1,408 units for the prior year period. Diesel Class A units shipped were 1,096 versus 980, gas Class A units shipped were 239 versus 328, and Class C units shipped were 183 versus 100.

Towable Recreational Vehicle Segment

The Company reported towable sales of $81.0 million for the second quarter of 2007, compared to sales of $89.2 million for the second quarter of 2006. Travel trailer and fifth-wheel registrations for the overall market, according to Statistical Surveys, reported a year-to-date increase of 1.7% through May 2007; the Company reported a 3.5% decline in retail sales for the same period.

Gross margin for the second quarter of 2007 for the towable segment was $8.3 million, or 10.2% of sales, compared to $9.6 million, or 10.8% of sales for the second quarter of 2006. Operating income was $2.4 million, compared to $1.6 million for the second quarter of 2006.

For the second quarter of 2007, towable unit sales, including specialty trailers, were 5,210 units, down from 5,617 units for the same period a year ago.

Motorhome Resorts Segment

Resort sales for the second quarter of 2007 were $3.7 million, down 42.2% from $6.4 million in the second quarter of 2006.

In the second quarter of 2007, the Company sold 6 lots at the Indio resort and 15 lots at the Las Vegas resort. Currently 32 lots are available in Indio and 36 lots are available in Las Vegas. Operating income for the segment was $88,000, down from $2.4 million for the same period last year.

The Company's new resort locations in the Palm Springs, Calif. area and Naples, Fla. area are currently under development, and new lots at these resorts are expected to be available for sale in early 2008.

2007 Business Outlook

"The improvement in the first half of 2007 was primarily due to the Company's progress in improving plant efficiencies and stronger momentum in motorized sales," said Marty Daley, Chief Financial Officer of Monaco Coach Corporation. "Given current run rates and backlog, we are generally optimistic about achieving our previously discussed earnings guidance of approximately $0.37 to $0.41 per share for the year based on sales of approximately $1.3 billion."

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, Wednesday, July 25, 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 event 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 5,300 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 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 expectations for the popularity of the 2008 product line-up, for further plant efficiencies and increases in capacity utilization in connection with the consolidation of towable manufacturing, and for new lots to be available for sale in Palm Springs, California and Naples, Florida in early 2008, as well as the earnings guidance under "2007 Business Outlook" 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 including competitors' offerings, failure to realize gains from the consolidation of towable manufacturing as anticipated, a decline in consumer confidence, an increase in interest rates affecting retail and wholesale financing and an increase in the price or availability of fuel. 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 2006, and the 2006 Annual Report to Shareholders for additional factors. These filings can be accessed over the Internet at http://www.sec.gov/ or http://www.monaco-online.com/.

CONTACT: Craig Wanichek Director of Investor Relations Monaco Coach Corporation (541) 681-8029 craig.wanichek@monacocoach.com MONACO COACH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands of dollars, except share and per share data) December 30, June 30, 2006 2007 (unaudited) ASSETS Current assets: Cash $4,984 $2,233 Trade receivables, net 81,588 111,590 Inventories, net 155,871 147,818 Resort lot inventory 7,997 7,151 Prepaid expenses 5,624 4,881 Income taxes receivable 6,901 0 Deferred income taxes 38,038 39,894 Total current assets 301,003 313,567 Property, plant, and equipment, net 153,895 149,017 Land held for development 16,300 24,321 Investment in joint venture 0 3,695 Debt issuance costs net of accumulated amortization of $912 and $1,068, respectively 540 577 Goodwill 86,412 86,412 Total assets $558,150 $577,589 LIABILITIES Current liabilities: Book overdraft 16,626 0 Current portion of long-term debt 5,714 5,714 Line of credit 2,036 0 Income taxes payable 0 2,196 Accounts payable 72,591 97,949 Product liability reserve 15,764 15,833 Product warranty reserve 33,804 36,126 Accrued expenses and other liabilities 44,364 50,079 Discontinued operations 298 0 Total current liabilities 191,197 207,897 Long-term debt, less current portion 29,071 26,214 Deferred income taxes 21,678 21,301 Deferred revenue 883 783 Total liabilities 242,829 256,195 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, 29,769,356 and 29,950,917 issued and outstanding, respectively 298 300 Additional paid-in capital 63,722 67,418 Retained earnings 251,301 253,676 Total stockholders' equity 315,321 321,394 Total liabilities and stockholders' equity $558,150 $577,589 MONACO COACH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited: in thousands of dollars, except share and per share data) Quarter Ended Six Months Ended July 1, June 30, July 1, June 30, 2006 2007 2006 2007 Net sales $321,283 $335,319 $706,350 $657,563 Cost of sales 290,792 298,721 627,410 584,969 Gross profit 30,491 36,598 78,940 72,594 Selling, general, and administrative expenses 29,429 27,866 63,407 60,223 Plant relocation costs 269 0 269 0 Operating income 793 8,732 15,264 12,371 Other income, net 256 379 388 492 Interest expense (940) (947) (2,192) (1,914) Loss from investment in joint venture 0 (699) 0 (977) Income before income taxes, continuing operations 109 7,465 13,460 9,972 Provision (benefit) for income taxes, continuing operations (370) 3,001 4,688 4,009 Net income from continuing operations 479 4,464 8,772 5,963 Loss from discontinued operations, net of tax provision (107) 0 (107) 0 Net income $372 $4,464 $8,665 $5,963 Earnings per common share: Basic from continuing operations $0.01 $0.15 $0.29 $0.20 Basic from discontinued operations 0.00 0.00 0.00 0.00 Basic $0.01 $0.15 $0.29 $0.20 Diluted from continuing operations $0.01 $0.15 $0.29 $0.20 Diluted from discontinued operations 0.00 0.00 0.00 0.00 Diluted $0.01 $0.15 $0.29 $0.20 Weighted-average common shares outstanding: Basic 29,708,892 29,946,436 29,672,558 29,888,068 Diluted 29,891,165 30,370,432 29,859,549 30,387,879 MONACO COACH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited: in thousands of dollars) Six Months Ended July 1, 2006 June 30, 2007 Increase (Decrease) in Cash: Cash flows from operating activities: Net income $8,665 $5,963 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Gain on sale of assets (12) (111) Depreciation and amortization 6,973 7,068 Deferred income taxes (5,367) (2,232) Stock-based compensation expense 1,720 2,484 Changes in working capital accounts: Trade receivables, net (560) (30,002) Inventories (6,841) 3,993 Resort lot inventory 917 846 Prepaid expenses (1,068) 738 Land held for development (16,300) (8,021) Accounts payable 17,439 25,358 Product liability reserve (1,184) 69 Product warranty reserve 1,328 2,048 Income taxes payable 2,443 9,097 Accrued expenses and other liabilities 8,663 5,717 Deferred revenue 983 (100) Discontinued operations 2,247 (18) Net cash provided by operating activities 20,046 22,897 Cash flows from investing activities: Additions to property, plant, and equipment (5,771) (2,669) Investment in joint venture 0 611 Proceeds from sale of assets 98 505 Net cash used in investing activities (5,673) (1,553) Cash flows from financing activities: Book overdraft (14,545) (16,626) Borrowings (payments) on lines of credit, net 7,108 (2,036) Payments on long-term notes payable (2,857) (2,857) Debt issuance costs 0 (193) Dividends paid (3,563) (3,597) Issuance of common stock 1,236 1,078 Tax benefit of stock-based awards exercised or vested 0 136 Discontinued operations 90 0 Net cash used in financing activities (12,531) (24,095) Net change in cash 1,842 (2,751) Cash at beginning of period 586 4,984 Cash at end of period $2,428 $2,233 Monaco Coach Corporation Segment Reporting (Unaudited: dollars in thousands) Results of Consolidated Operations Quarter Quarter Ended % of Ended % of July 1, 2006 Sales June 30, 2007 Sales Net sales $321,283 100.00% $335,319 100.00% Cost of sales 290,792 90.51% 298,721 89.09% Gross profit 30,491 9.49% 36,598 10.91% Selling, general and administrative expenses 29,429 9.16% 27,866 8.31% Plant relocation costs 269 0.08% - 0.00% Operating income 793 0.25% 8,732 2.60% Other income and interest expense 684 0.21% 1,267 0.38% Income before income taxes 109 0.03% 7,465 2.23% Income taxes (370) -0.12% 3,001 0.89% Income from continuing operations 479 0.15% 4,464 1.33% Loss from discontinued operations, net of tax provision (107) -0.03% - 0.00% Net income $372 0.12% $4,464 1.33% Depreciation & amortization $3,599 $3,531 Capital expenditures 2,025 899 Raw materials inventory WIP inventory Finished goods inventory Six Months Six Months Ended % of Ended % of July 1, 2006 Sales June 30, 2007 Sales Net sales $706,350 100.00% $657,563 100.00% Cost of sales 627,410 88.82% 584,969 88.96% Gross profit 78,940 11.18% 72,594 11.04% Selling, general and administrative expenses 63,407 8.98% 60,223 9.16% Plant relocation costs 269 0.04% - 0.00% Operating income 15,264 2.16% 12,371 1.88% Other income and interest expense 1,804 0.26% 2,399 0.36% Income before income taxes 13,460 1.91% 9,972 1.52% Income taxes 4,688 0.66% 4,009 0.61% Income from continuing operations 8,772 1.24% 5,963 0.91% Loss from discontinued operations, net of tax provision (107) -0.02% - 0.00% Net income $8,665 1.23% $5,963 0.91% Depreciation & amortization $6,973 $7,068 Capital expenditures 5,771 2,669 Raw materials inventory 76,432 67,448 WIP inventory 48,834 57,306 Finished goods inventory 64,868 23,065 Total capital expenditures for 2007 are expected to be $10 - 12 million. Expected tax rate for all of 2007 is approximately 40% Motorized Recreational Vehicle Segment Quarter Quarter Ended % of Ended % of July 1, 2006 Sales June 30, 2007 Sales Net sales $225,620 100.00% $250,662 100.00% Cost of sales 209,727 92.96% 224,403 89.52% Gross profit 15,893 7.04% 26,259 10.48% Selling, general and administrative expenses & corporate overhead 18,780 8.32% 20,035 7.99% Bend relocation costs 269 0.12% - 0.00% Operating income (loss) $(3,156) -1.40% $6,224 2.48% Units Sold Class A Diesel 980 1,096 Class A Gas 328 239 Class C 100 183 Total 1,408 1,518 Average Gross Wholesale Price Class A Diesel $198 $201 Class A Gas 85 77 Class C 51 54 Internal retail registrations Class A Diesel 1,154 1,338 Class A Gas 335 261 Class C 59 122 Total 1,548 1,721 Additional Information* Backlog units Backlog value** Dealer Inventory (units) Number of production lines Capacity utilization Number of independent distribution points Considering the towable restructure, capacity utilization would have been 67% on 5 production lines. Six Months Six Months Ended % of Ended % of July 1, 2006 Sales June 30, 2007 Sales Net sales $480,569 100.00% $496,210 100.00% Cost of sales 439,589 91.47% 443,464 89.37% Gross profit 40,980 8.53% 52,746 10.63% Selling, general and administrative expenses & corporate overhead 38,870 8.09% 43,189 8.70% Bend relocation costs 269 0.06% - 0.00% Operating income (loss) $1,841 0.38% $9,557 1.93% Units Sold Class A Diesel 2,123 2,208 Class A Gas 685 437 Class C 215 333 Total 3,023 2,978 Average Gross Wholesale Price Class A Diesel $196 $200 Class A Gas 85 78 Class C 52 53 Internal retail registrations Class A Diesel 2,158 2,424 Class A Gas 629 530 Class C 99 195 Total 2,886 3,149 Additional Information* Backlog units 900 Backlog value** $149,000 Dealer Inventory (units) 3,043 Number of production lines 6 Capacity utilization 52% Number of independent distribution points 227 Considering the towable restructure, capacity utilization would have been 67% on 5 production lines. * As of 7/21/2007 ** Based on motorized average gross wholesale price Towable Recreational Vehicle Segment Quarter Quarter Ended % of Ended % of July 1, 2006 Sales June 30, 2007 Sales Net sales $89,226 100.00% $80,968 100.00% Cost of sales 79,582 89.19% 72,686 89.77 Gross profit 9,644 10.81% 8,282 10.23% Selling, general and administrative expenses & corporate overhead 8,057 9.03% 5,862 7.24% Operating income $1,587 1.78% $2,420 2.99% Units Sold Travel trailer and fifth wheel 4,173 3,907 Specialty trailer 1,444 1,303 Total 5,617 5,210 Average Gross Wholesale Price Travel trailer and fifth wheel 20 19 Specialty trailer 8 10 Internal retail registrations Travel trailer and fifth wheel 4,648 4,421 Additional Information* Backlog units travel trailers and fifth-wheels Backlog value Number of production lines Capacity utilization Number of independent distribution points Considering the towable restructure, capacity utilization would have been 63% on 7 production lines. Six Months Six Months Ended % of Ended % of July 1, 2006 Sales June 30, 2007 Sales Net sales $203,643 100.00% $150,448 100.00% Cost of sales 179,853 88.32% 137,439 91.35% Gross profit 23,790 11.68% 13,009 8.65% Selling, general and administrative expenses & corporate overhead 17,509 8.60% 12,234 8.13% Operating income $6,281 3.08% $775 0.52% Units Sold Travel trailer and fifth wheel 8,160 7,166 Specialty trailer 2,671 2,333 Total 10,831 9,499 Average Gross Wholesale Price Travel trailer and fifth wheel 19 20 Specialty trailer 8 9 Internal retail registrations Travel trailer and fifth wheel 7,059 6,428 Additional Information* Backlog units travel trailers and fifth-wheels 1,745 Backlog value $34,900 Number of production lines 8 Capacity utilization 52% Number of independent distribution points 675 Considering the towable restructure, capacity utilization would have been 63% on 7 production lines. * As of 7/21/2007 Motorhome Resorts Segment Quarter Quarter Ended % of Ended % of July 1, 2006 Sales June 30, 2007 Sales Net sales $6,437 100.00% $3,689 100.00% Cost of sales 1,483 23.04% 1,632 44.24% Gross profit 4,954 76.96% 2,057 55.76% Selling, general and administrative expenses & corporate overhead 2,592 40.27% 1,969 53.37% Operating income $2,362 36.69% $88 2.39% Lots sold in period 30 21 Unsold developed lots Project-to-date lots sold Lots with deposits Six Months Six Months Ended % of Ended % of July 1, 2006 Sales June 30, 2007 Sales Net sales $22,138 100.00% $10,905 100.00% Cost of sales 7,968 35.99% 4,066 37.29% Gross profit 14,170 64.01% 6,839 62.71% Selling, general and administrative expenses & corporate overhead 7,028 31.75% 4,800 44.02% Operating income $7,142 32.26% $2,039 18.70% Lots sold in period 108 50 Unsold developed lots 78 68 Project-to-date lots sold 642 739 Lots with deposits 7 4 Resort Locations: Las Vegas, NV Total lots in resort are 407, all of which have been developed. Indio, CA Total lots in resort are 400, all of which have been developed. LaQuinta, CA

Total expected lots in resort are 400, some of which will be available to sell first quarter of 2008.

Naples, FL

Total expected lots in resort are 198, some of which will be available to sell first quarter of 2008.