Monaco Coach Corporation Reports Fourth Quarter and 2007 Fiscal Year-End Profits

COBURG, Ore., Feb. 6 /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 29, 2007.

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

Revenues for the fourth quarter of 2007 were $292.1 million, or 2.4% lower than the $299.2 million in revenues for the fourth quarter of 2006. Gross profit for the period was $32.1 million, up 18.6% from $27.1 million a year ago. The Company reported operating income of $4.5 million for the quarter compared to an operating loss of $512 thousand for the fourth quarter of 2006. The Company reported net income of $2.7 million, reversing a net loss of $562 thousand for the fourth quarter of 2006. Earnings were $0.09 per diluted share for the fourth quarter of 2007 versus a loss of $0.02 per diluted share for the fourth quarter of 2006.

For the fiscal year ended December 29, 2007, Monaco Coach reported revenues of $1.3 billion, level with fiscal year 2006 revenues. Gross profit for the year was $140.9 million, up 13.1% compared to $124.5 million for 2006. Operating income for the year was $23.4 million, compared to $3.8 million for 2006. Net income for 2007 was $12.3 million, compared to $1.0 million earned in 2006. Earnings per share for the fiscal year were $0.41 per diluted share compared to $0.03 per diluted share for 2006.

Kay Toolson, Chairman and Chief Executive Officer of Monaco Coach Corporation, stated, "We are very pleased with our 2007 results. The steps we have taken over the last 18 months to make the Company more efficient have significantly increased our profitability. We are committed to maintaining production levels that will produce optimal inventory levels for our dealer partners and the Company."

"Our Motorized RV Segment continues its strong momentum both in the marketplace and profitability. Our diesel Class A market share improved by over 10% through November, and our gasoline market share is also beginning to improve. We feel the Fed's recent interest rate cuts should help the RV market in the second half of 2008. We believe that while some RV buyers may delay their purchasing decisions when times are uncertain, they rarely leave the RV lifestyle and can be expected to return to purchase a new RV when their confidence is restored," said Toolson.

"The changes we made throughout our manufacturing processes, including increasing efficiencies at our sub-assembly plants, and reconfiguring and consolidating production lines, have led to better gross margins," said John Nepute, President of Monaco Coach Corporation. "Our industry-leading dealer initiative, Franchise for the Future, has aided us in increasing market share in a down market. The Company will continue to implement our proven strategy of matching our production level with wholesale and retail demand to manage the need for incentives to move products to our dealer partners."

Fourth quarter 2007 selling, general, and administrative expenses of $27.6 million were similar to those in the fourth quarter of 2006.

At year-end the Company reported finished goods inventory of $33.2 million versus $26.1 million at the end of the third quarter of 2007, a cash balance of $6.3 million and a zero balance on its line of credit. Following the Board of Directors' authorization in December to repurchase up to $30.0 million of its common stock, the Company, subsequent to year-end, purchased 313 thousand shares in the open market for approximately $2.8 million.

Motorized Recreational Vehicle Segment

The Motorized RV Segment reported net sales of $244.3 million for the fourth quarter of 2007, an increase of 1.4% compared to $240.9 million for the fourth quarter of 2006. Total units shipped for the quarter were 1,408, an increase of 1.1% compared to the same period in 2006.

Gross profit was $28.5 million, or 11.7% of net sales, for the fourth quarter of 2007, compared to $19.7 million, or 8.2% of net sales, for the fourth quarter of 2006. This resulted in a significant improvement in the segment's operating income from a loss of $31 thousand in the fourth quarter of 2006 to operating income of $8.3 million in the fourth quarter of 2007.

"The increase in gross profit and profitability was the result of better absorption of indirect costs and material savings," Nepute noted. "Internal retail reporting, however, has indicated retail sales slowed in January 2008. Although this has tempered our outlook for this segment in the near term, we remain encouraged by our dealers' positive acceptance of our models shown at the November 2007 Louisville RV Show, and anticipate that our motorized RV market share will continue to increase in 2008."

Net sales for the Motorized RV Segment for 2007 were $998.4 million, a 6.0% increase over net sales of $941.7 million for 2006. Gross profit for 2007 was $110.6 million, or 11.1% of net sales, compared to $72.5 million, or 7.7% of net sales, for 2006. Operating income for 2007 was $24.7 million, compared to an operating loss of $6.2 million for 2006. There were 5,856 units sold in 2007, compared to 5,756 in 2006.

Towable Recreational Vehicle Segment

The Towable RV Segment reported net sales of $46.7 million for the fourth quarter of 2007, a 7.0% decrease compared to $50.3 million for the fourth quarter of 2006. Gross profit for the segment was $3.0 million, or 6.4% of net sales, compared to a gross profit of $2.2 million, or 4.4% of net sales, for the fourth quarter of 2006. Operating loss for the fourth quarter of 2007 was $2.5 million, compared to an operating loss of $2.9 million for the fourth quarter of 2006. Fourth quarter 2007 towable units sold were 2,837, up 6.1% compared to 2,673 for the fourth quarter of 2006 and included 773 specialty trailers sold in the fourth quarter of 2007 and 613 in the fourth quarter of 2006.

"The Towable RV Segment's improvement in gross margin for the fourth quarter of 2007 was the result of material and other direct cost savings," said Nepute. "Increased selling, general, and administrative expenses relating to higher payroll costs and marketing expenses in the segment offset these savings. Depressed operating results in the fourth quarter is a typical seasonal pattern for the segment; however, the towable market remains extremely competitive."

Net sales for the Towable RV Segment for 2007 were $261.4 million, compared to net sales of $324.3 million for 2006, which included $26.8 million of FEMA emergency living units. Gross profit for 2007 was $22.7 million, or 8.7% of net sales, compared to $31.5 million, or 9.7% of net sales, for 2006. The Company reported an operating loss of $904 thousand in 2007 versus operating income of $1.4 million for 2006. There were 16,276 units sold in 2007, which included 4,166 specialty trailers, compared to 19,307 units in 2006, which included 4,304 specialty trailers and 2,019 FEMA units.

Motorhome Resorts Segment

Net sales for the Motorhome Resorts Segment for the fourth quarter of 2007 were $1.2 million, compared to $8.0 million for the fourth quarter of 2006. Gross profit for the Motorhome Resorts Segment was $631 thousand for the fourth quarter of 2007, compared to $5.1 million for the fourth quarter of 2006. The Company reported a $1.2 million operating loss for the fourth quarter of 2007, compared to operating income of $2.4 million for the fourth quarter of 2006.

"Decreased sales traffic combined with declining inventory at the resorts have slowed sales substantially," said Nepute. "Activity has picked up modestly in the first quarter of 2008, and we anticipate selling the remaining 62 lots at Indio, California and Las Vegas in 2008. The resort in Naples, Florida is moving forward toward completion and should have lots available for sale in the second quarter of 2008. Construction on our La Quinta, California motorhome resort has been delayed due to longer than expected timelines for certain regulatory and permitting requirements. We now expect to have lots available for sale by the end of the fourth quarter of 2008."

Net sales for the Motorhome Resorts Segment for 2007 were $12.3 million, compared to sales of $32.0 million for 2006. Gross profit for this segment was $7.5 million for 2007, compared to $20.5 million for 2006. For 2007 the segment reported an operating loss of $405 thousand, compared to $8.6 million in operating income for 2006.

2008 Business Outlook

Marty Daley, Monaco Coach Corporation Vice President and Chief Financial Officer, stated, "We are still comfortable that if the RV market is flat in 2008, which would likely require a rebound in consumer confidence, we would be able to achieve previously stated guidance. The soft retail environment that we are seeing so far in the first quarter could lead to a declining overall market. However, given our internal improvements and anticipated gains in market share, we believe the Company's results would be similar to 2007 if RV markets were down approximately 10%. We are committed to implementing additional cost saving initiatives and modifying production run rates in 2008, as we have done over the past 18 months."

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 Wednesday, February 6, 2008. 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

Monaco Coach Corporation, a leading national manufacturer of motorized and towable recreational vehicles, is ranked as the number one producer of diesel-powered motorhomes. Dedicated to quality and service, Monaco Coach is a leader in innovative RVs designed to meet the needs of a broad range of customers with varied interests and offers products that appeal to RVers across generations.

Headquartered in Coburg, Oregon, with substantial manufacturing facilities in Indiana, Monaco Coach employs approximately 5,000 people. The Company offers a variety of RVs, from entry-level priced towables to custom-made luxury models under the Monaco, Holiday Rambler, Safari, Beaver, McKenzie, R-Vision and Dodge brand names. The Company maintains RV service centers in Harrisburg, Oregon, Elkhart, Indiana and Wildwood, Florida and operates motorhome-only resorts in California, Florida and Nevada.

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 expectation for increased motorized RV market share in 2008, gains in towable market share, RV markets' reaction to interest rate cuts by the Federal Reserve Board, anticipated sales of lots at existing resort locations and availability for sale of lots at our new locations and the statements made under the 2008 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, unforeseen regulatory impediments in resort lot development, failure to realize RV market improvement as a result of interest rate cuts, 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 2006, and the 2006 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 (Tables to follow) MONACO COACH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited: dollars in thousands) December 30, December 29, 2006 2007 ASSETS Current assets: Cash $4,984 $6,282 Trade receivables, net 81,588 88,170 Inventories, net 155,871 158,236 Resort lot inventory 7,997 8,838 Prepaid expenses 5,624 5,142 Income taxes receivable 6,901 0 Deferred income taxes 38,038 37,608 Total current assets 301,003 304,276 Property, plant, and equipment, net 153,895 144,291 Land held for development 16,300 24,321 Investment in joint venture 0 4,059 Debt issuance costs net of accumulated amortization of $912 and $1,098, respectively 540 498 Goodwill 86,412 86,323 Total assets $558,150 $563,768 LIABILITIES Current liabilities: Book overdraft $16,626 $1,601 Current portion of long-term debt 5,714 5,714 Line of credit 2,036 0 Income taxes payable 0 3,413 Accounts payable 72,591 82,833 Product liability reserve 15,764 14,625 Product warranty reserve 33,804 35,171 Accrued expenses and other liabilities 44,364 48,609 Discontinued operations 298 0 Total current liabilities 191,197 191,966 Long-term debt, less current portion 29,071 23,357 Deferred income taxes 21,678 21,506 Deferred revenue 883 683 Total liabilities 242,829 237,512 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 29,989,534 issued and outstanding, respectively 298 300 Additional paid-in capital 63,722 69,514 Retained earnings 251,301 256,442 Total stockholders' equity 315,321 326,256 Total liabilities and stockholders' equity $558,150 $563,768 MONACO COACH CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited: dollars in thousands, except share and per share data) Quarter Ended Year Ended December 30, December 29, December 30, December 29, 2006 2007 2006 2007 Net sales $299,163 $292,146 $1,297,986 $1,272,130 Cost of sales 272,092 260,051 1,173,443 1,131,262 Gross profit 27,071 32,095 124,543 140,868 Selling, general, and administrative expenses 27,583 27,574 120,465 117,459 Plant relocation costs 0 0 269 0 Operating income (loss) (512) 4,521 3,809 23,409 Other income, net 108 68 615 851 Interest expense (932) (753) (4,430) (3,496) Gain (loss) from investment in joint venture 0 653 0 (614) Income (loss) before income taxes, continuing operations (1,336) 4,489 (6) 20,150 Provision for (benefit from) income taxes, continuing operations (649) 1,807 (992) 7,824 Income (loss) from continuing operations (687) 2,682 986 12,326 Income from discontinued operations, net of tax provision 125 0 18 0 Net income (loss) $(562) $2,682 $1,004 $12,326 Earnings (loss) per common share: Basic from continuing operations $(0.02) $0.09 $0.03 $0.41 Basic from discontinued operations 0.00 0.00 0.00 0.00 Basic $(0.02) $0.09 $0.03 $0.41 Diluted from continuing operations $(0.02) $0.09 $0.03 $0.41 Diluted from discontinued operations 0.00 0.00 0.00 0.00 Diluted $(0.02) $0.09 $0.03 $0.41 Weighted-average common shares outstanding: Basic 29,760,969 29,987,563 29,712,957 29,931,730 Diluted 30,018,115 30,246,248 29,902,830 30,346,917 MONACO COACH CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited: dollars in thousands) Year Ended December 30, December 29, 2006 2007 Increase (Decrease) in Cash: Cash flows from operating activities: Net income $1,004 $12,326 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Loss on sale of assets 14 58 Depreciation and amortization 14,177 14,132 Deferred income taxes (1,900) 347 Stock-based compensation expense 2,759 4,011 Net losses in equity investment 0 614 Changes in working capital accounts: Trade receivables, net 21,078 (6,582) Inventories 27,421 (6,425) Resort lot inventory 1,138 (841) Prepaid expenses (1,270) 479 Land held for development (16,300) (8,022) Accounts payable (5,708) 10,242 Product liability reserve (3,762) (1,139) Product warranty reserve 902 1,093 Income taxes payable (6,664) 10,314 Accrued expenses and other liabilities 7,224 4,374 Deferred revenue 883 (200) Discontinued operations 4,271 (18) Net cash provided by operating activities 45,267 34,763 Cash flows from investing activities: Additions to property, plant, and equipment (9,324) (5,279) Investment in joint venture 0 (366) Proceeds from sale of assets 215 644 Net cash used in investing activities (9,109) (5,001) Cash flows from financing activities: Book overdraft 2,076 (15,025) Payments on lines of credit, net (22,964) (2,036) Payments on long-term notes payable (5,715) (5,714) Debt issuance costs (79) (278) Dividends paid (7,134) (7,194) Issuance of common stock 1,799 1,508 Tax benefit of stock-based award activity 161 275 Discontinued operations 96 0 Net cash used in financing activities (31,760) (28,464) Net change in cash 4,398 1,298 Cash at beginning of period 586 4,984 Cash at end of period $4,984 $6,282 Monaco Coach Corporation Segment Reporting (Unaudited: dollars in thousands) Results of Consolidated Operations Quarter Ended Quarter Ended December December 30, % of 29, % of 2006 Sales 2007 Sales Net sales $299,163 100.00% $292,146 100.00% Cost of sales 272,092 90.95% 260,051 89.01% Gross profit 27,071 9.05% 32,095 10.99% Selling, general, and administrative expenses 27,583 9.22% 27,574 9.44% Plant relocation costs - 0.00% - 0.00% Operating income (loss) (512) -0.17% 4,521 1.55% Other income and interest expense 824 0.28% 32 0.01% Income (loss) before income taxes (1,336) -0.45% 4,489 1.54% Income taxes (649) -0.22% 1,807 0.62% Income (loss) from continuing operations (687) -0.23% 2,682 0.92% Income from discontinued operations, net of tax provision 125 0.04% - 0.00% Net income (loss) $(562) -0.19% $2,682 0.92% Depreciation and amortization $3,596 $3,519 Capital expenditures 1,865 1,085 Raw materials inventory WIP inventory Finished goods inventory Year Ended Year Ended December December 30, % of 29, % of 2006 Sales 2007 Sales Net sales $1,297,986 100.00% $1,272,130 100.00% Cost of sales 1,173,443 90.40% 1,131,262 88.93% Gross profit 124,543 9.60% 140,868 11.07% Selling, general, and administrative expenses 120,465 9.28% 117,459 9.23% Plant relocation costs 269 0.02% - 0.00% Operating income (loss) 3,809 0.29% 23,409 1.84% Other income and interest expense 3,815 0.29% 3,259 0.26% Income (loss) before income taxes (6) 0.00% 20,150 1.58% Income taxes (992) -0.08% 7,824 0.62% Income (loss) from continuing operations 986 0.08% 12,326 0.97% Income from discontinued operations, net of tax provision 18 0.00% - 0.00% Net income (loss) $1,004 0.08% $12,326 0.97% Depreciation and amortization $14,177 $14,132 Capital expenditures 9,324 5,279 Raw materials inventory 73,624 70,235 WIP inventory 55,474 54,760 Finished goods inventory 26,773 33,241 Motorized Recreational Vehicle Segment Quarter Ended Quarter Ended December December 30, % of 29, % of 2006 Sales 2007 Sales Net sales $240,929 100.00% $244,256 100.00% Cost of sales 221,200 91.81% 215,801 88.35% Gross profit 19,729 8.19% 28,455 11.65% Selling, general, and administrative expenses and corporate overhead 19,760 8.20% 20,140 8.25% Plant relocation costs - 0.00% - 0.00% Operating income (loss) $(31) -0.01% $8,315 3.40% Units Sold Class A Diesel 1,086 1,007 Class A Gas 155 261 Class C 151 140 Total 1,392 1,408 Average Gross Wholesale Price Class A Diesel $203 $212 Class A Gas 81 82 Class C 53 56 Internal Retail Registrations Class A Diesel 1,038 888 Class A Gas 243 210 Class C 113 124 Total 1,394 1,222 Additional Information* Backlog units Backlog value Dealer inventory (units) Number of production lines Capacity utilization Number of independent distribution points Year Ended Year Ended December December 30, % of 29, % of 2006 Sales 2007 Sales Net sales $941,657 100.00% $998,448 100.00% Cost of sales 869,110 92.30% 887,830 88.92% Gross profit 72,547 7.70% 110,618 11.08% Selling, general, and administrative expenses and corporate overhead 78,478 8.33% 85,900 8.60% Plant relocation costs 269 0.03% - 0.00% Operating income (loss) $(6,200) -0.66% $24,718 2.48% Units Sold Class A Diesel 4,297 4,295 Class A Gas 925 928 Class C 534 633 Total 5,756 5,856 Average Gross Wholesale Price Class A Diesel $196 $205 Class A Gas 84 80 Class C 52 54 Internal Retail Registrations Class A Diesel 4,164 4,388 Class A Gas 1,154 977 Class C 367 476 Total 5,685 5,841 Additional Information* Backlog units 674 Backlog value 91,571 Dealer inventory (units) 3,436 Number of production lines 5 Capacity utilization 66% Number of independent distribution points 286 * As of 12/29/2007 Towable Recreational Vehicle Segment Quarter Ended Quarter Ended December December 30, % of 29, % of 2006 Sales 2007 Sales Net sales $50,250 100.00% $46,723 100.00% Cost of sales 48,037 95.60% 43,714 93.56% Gross profit 2,213 4.40% 3,009 6.44% Selling, general, and administrative expenses and corporate overhead 5,107 10.16% 5,558 11.90% Operating income (loss) $(2,894) -5.76% $(2,549) -5.46% Units Sold Travel trailer and fifth-wheel 2,060 2,064 Specialty trailer 613 773 Total 2,673 2,837 Average Gross Wholesale Price Travel trailer and fifth-wheel 24 21 Specialty trailer 10 11 Internal Retail Registrations Travel trailer and fifth-wheel 1,870 1,671 Additional Information: Travel Trailer and Fifth-Wheel* Backlog units Backlog value Number of production lines Capacity utilization Number of independent brand distribution points Year Ended Year Ended December December 30, % of 29, % of 2006 Sales 2007 Sales Net sales $324,342 100.00% $261,391 100.00% Cost of sales 292,876 90.30% 238,684 91.31% Gross profit 31,466 9.70% 22,707 8.69% Selling, general, and administrative expenses and corporate overhead 30,060 9.27% 23,611 9.03% Operating income (loss) $1,406 0.43% $(904) -0.35% Units Sold Travel trailer and fifth-wheel 15,003 12,110 Specialty trailer 4,304 4,166 Total 19,307 16,276 Average Gross Wholesale Price Travel trailer and fifth-wheel 20 20 Specialty trailer 9 10 Internal Retail Registrations Travel trailer and fifth-wheel 11,759 11,999 Additional Information: Travel Trailer and Fifth-Wheel* Backlog units 1,290 Backlog value 27,288 Number of production lines 7 Capacity utilization 57% Number of independent brand distribution points 668 * As of 12/29/2007 Motorhome Resorts Segment Quarter Ended Quarter Ended December December 30, % of 29, % of 2006 Sales 2007 Sales Net sales $7,984 100.00% $1,167 100.00% Cost of sales 2,855 35.76% 536 45.93% Gross profit 5,129 64.24% 631 54.07% Selling, general, and administrative expenses and corporate overhead 2,716 34.02% 1,876 160.75% Operating income (loss) $2,413 30.22% $(1,245) -106.68% Lots sold in period 36 6 Unsold developed lots Project-to-date lots sold Lots with deposits Year Ended Year Ended December December 30, % of 29, % of 2006 Sales 2007 Sales Net sales $31,987 100.00% $12,291 100.00% Cost of sales 11,457 35.82% 4,748 38.63% Gross profit 20,530 64.18% 7,543 61.37% Selling, general, and administrative expenses and corporate overhead 11,927 37.29% 7,948 64.67% Operating income (loss) $8,603 26.90% $(405) -3.30% Lots sold in period 153 56 Unsold developed lots 118 62 Project-to-date lots sold 689 745 Lots with deposits 27 11 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. La Quinta, CA Total expected lots in resort are 400, some of which will be available to sell fourth quarter of 2008. Naples, FL Total expected lots in resort are 198, some of which will be available to sell second quarter of 2008.