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Monaco Coach Corporation Reports First Quarter Results

COBURG, Ore., April 23 /PRNewswire-FirstCall/ -- Monaco Coach Corporation (NYSE: MNC), one of the nation's leading manufacturers of recreational vehicles, today reported results for the first quarter ended March 29, 2008.

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

First quarter 2008 revenues were $252.4 million, compared to $322.2 million in revenues for the first quarter of 2007. First quarter 2008 gross profit was $15.8 million, compared to $36.0 million a year ago. Operating loss for the first quarter of 2008 was $12.8 million, compared to operating income of $3.6 million for the first quarter of 2007. Net loss for the first quarter of 2008 was $8.5 million, compared to $1.5 million net income a year ago. For the first quarter of 2008, diluted loss per share was $0.28 versus earnings per share of $0.05 for the same period last year.

"Plummeting consumer confidence, driving consumers to delay their purchases of new RVs, and a difficult consumer lending environment directly impacted Monaco Coach Corporation's first quarter results and sales industry- wide," said Kay Toolson, Chairman and Chief Executive Officer. "In spite of the reduction in demand we experienced during the first quarter, we are pleased to report that our market share was up 8.5% for the first two months of 2008, the same period for which Statistical Surveys, Inc. reported the overall motorhome market was down 20.6%."

"As we have proven during prior market downturns, we feel confident that we can make, and are making, the required changes to return the Company to profitability. In this regard, we have made good progress in several areas in recent quarters. These improvements were overshadowed by the lower-than- expected sales volume that has affected our entire industry during the first quarter and by several expense categories that were higher than expected, including discounts, benefit costs, warranty and settlement," added Toolson.

"We are committed to adjusting our business in order to operate profitably under today's market conditions. This will require changes such as a further reduction in production output, which has been ongoing, as well as reductions in our personnel across the Company. We will also continue to drive down manufacturing costs through purchasing initiatives and projects designed to further improve our manufacturing plant utilization rates. Looking forward we believe that the changes we are making are prudent and necessary, will make our Company stronger and position us to react quickly when the market improves."

"We have always maintained that the RV business is product driven, and we have always worked very hard to be on the leading edge of new product offerings. This year will be no different," Toolson noted. "Our product development pipeline is strong and includes a Class C unit built on the Sprinter chassis, which will be ready for our dealer meeting in June, a Super- C model that will be available in the fall and additional models under development. We remain aggressive in pursuing innovative, fuel-efficient, less expensive new models that will primarily be incremental business. Changes introduced across the 2009 model line-up, we believe, will help us continue market share gains."

Gross profit margin for the Company decreased in the first quarter of 2008 to 6.3% of sales, compared to 11.2% in the first quarter of 2007. John Nepute, President of Monaco Coach Corporation, stated, "The changes we made to our business model in 2007 had us well positioned for a flat or modestly declining 2008 market. However, it now appears likely that the Class A market decline will be more significant than originally anticipated, and Class A retail sales are expected to decline for the fourth straight year."

"When the normal first quarter pick-up in demand did not occur, we responded by reducing our levels of production which influenced our ability to absorb indirect costs. In addition, we also saw higher costs related to product mix, health care costs and warranty expenses during the quarter. Due to the hard work of our operational team, we were successful at managing the direct labor costs at our plants. Notwithstanding the lower volumes, our production lines are running very efficiently, and our model change process is on track."

Nepute concluded, "We were encouraged by the level of units we were able to sell during the quarter, in spite of the market, although the level of discounting was higher than forecasted. Finished goods inventory grew modestly compared to the end of the year. We anticipate the adjustment in our production levels will result in a greater backlog which will help reduce the level of discounting going forward. The Company will also continue to work with our dealer partners to provide targeted retail promotions that will attract customers to their lots and help stimulate both our motorized and towable unit sales."

For the first quarter of 2008, selling, general and administrative expenses were $28.6 million, down 11.5% compared to $32.4 million for the first quarter of 2007. Marty Daley, Chief Financial Officer, stated, "We are pleased that overall selling, general and administrative expenses were down this quarter compared to the first quarter last year. The reduction was the result of a decline in the amount paid out under our franchise program, an elimination of management bonus accrual and declining miscellaneous expenses, partially offset by increases in settlement and personnel costs. We will implement cost savings measures in the second quarter that will generate additional reductions in selling, general and administrative expenses."

Daley continued, "At the end of the quarter, our line of credit balance was $31.6 million and cash balance was $8.1 million. Our balance sheet remains solid and provides the Company with the flexibility to adjust and weather this type of market."

Motorized Recreational Vehicle Segment

Motorized sales in the first quarter of 2008 decreased 20.7% from $245.5 million in the first quarter of 2007 to $194.7 million. The overall mix shifted to lower-priced Class A gas and Class C models, and unit sales for these two classes were up 32.3% and 10.0%, respectively. The segment gross profit for the first quarter of 2008 was $11.8 million, compared to $26.5 million for the first quarter of 2007. The operating loss for the period was $8.6 million.

Unit sales of the Motorized RV Segment for the quarter totaled 1,200, down 17.8% from 1,460 units for the prior year period. Class A diesel units shipped were 773 versus 1,112, while Class A gas units shipped increased to 262 versus 198, and Class C units shipped were 165 versus 150.

Towable Recreational Vehicle Segment

The Company reported towable sales of $55.2 million for the first quarter of 2008, compared to sales of $69.5 million for the first quarter of 2007. Travel trailer and fifth-wheel registrations for the overall market, according to Statistical Surveys, Inc., reported a year-to-date decline of 8.7% through February 2008.

Gross margin for the first quarter of 2008 was $2.7 million, or 5.0% of sales, compared to $4.7 million, or 6.8% of sales for the first quarter of 2007. Lower gross margin was the result of discounting, sales volumes, and higher labor and warranty expenses partially offset by a reduction in material costs. Selling, general and administrative expenses including corporate overhead were $6.2 million, compared to $6.4 million for the first quarter of 2007. Operating loss was $3.5 million for the first quarter of 2008, compared to $1.6 million for the first quarter of last year.

For the first quarter of 2008, towable unit sales were 3,643 units, down from 4,289 units for the same period a year ago.

Motorhome Resorts Segment

Resort sales for the first quarter of 2008 were $2.4 million, down from $7.2 million in the first quarter of 2007. The reduction in lots sales was the result of limited available inventory for sale and lackluster real estate markets. In the first quarter of 2008, the Company sold 11 lots. Currently 51 lots are available for sale in Indio, California and Las Vegas, Nevada. Operating loss for the segment was $747,000.

The Company has purchased additional land in Bay Harbor, Michigan. This resort will consist of approximately 130 lots, which should be available for sale in the third quarter of 2008. The Naples, Florida resort has encountered some project delays and should have lots available for sale late in the third quarter. The La Quinta, California development has also been delayed.

2008 Business Outlook

"Forecasting motorized sales is extremely difficult in this time of economic uncertainty and therefore we expect that the motorized market will continue to be challenging in terms of wholesale demand during the coming months. On the towable side of the business there has been some improvement in our towable orders and it appears we have reached a production level which now matches demand," said Daley. "Given these market drivers, and with the additional cost savings initiatives that we are beginning to implement, we anticipate reducing our loss to between $0.15 and $0.20 per share in the second quarter."

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, April 23, 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 www.monaco-online.com. The event 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, 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, Nevada and Michigan.

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 www.monaco-online.com or www.trail-lite.com.

The statements above regarding the Company's belief that it can make the required changes to return to profitability, its expectations of further cost reductions in the second quarter, the expected timing and number of resort lots available for sale, the "2008 Business Outlook" section regarding anticipated results for the second quarter, expected capital expenditures and tax rate for 2008 are forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from these statements, including the Company's inability to make timely and sufficient cost reductions, continued declines in the wholesale and retail markets for recreational vehicles, consumers' preference for certain models and resort lots, delays in obtaining required regulatory approvals for lot sales, a decline in consumer confidence, an increase in interest rates affecting retail and wholesale financing, continued increases in the price of fuel or its availability, inability to make planned capital expenditures, tax rate changes or treatments 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 2007, and the 2007 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
                       (in thousands of dollars, except
                          share and per share data)

                                              December 29,       March 29,
                                                 2007              2008
                                                               (unaudited)
    ASSETS
    Current assets:
     Cash                                        $6,282            $8,081
     Trade receivables, net                      88,170            72,570
     Inventories, net                           158,236           161,191
     Resort lot inventory                         8,838            17,010
     Prepaid expenses                             5,142             4,336
     Income taxes receivable                          0             5,018
     Debt issuance costs, net                         0               423
     Deferred income taxes                       37,608            36,446
      Total current assets                      304,276           305,075

    Property, plant, and equipment, net         144,291           141,368
    Land held for development                    24,321            19,136
    Investment in joint venture                   4,059             4,184
    Debt issuance costs, net                        498                 0
    Goodwill                                     86,323            86,323

      Total assets                             $563,768          $556,086

    LIABILITIES
    Current liabilities:
     Book overdraft                              $1,601            $2,402
     Current portion of long-term debt            5,714            27,643
     Line of credit                                   0            31,592
     Income taxes payable                         3,726                 0
     Accounts payable                            82,833            68,405
     Product liability reserve                   14,625            15,489
     Product warranty reserve                    35,171            34,252
     Accrued expenses and other
      liabilities                                48,609            38,915
      Total current liabilities                 192,279           218,698

    Long-term debt, less current portion         23,357                 0
    Deferred income taxes                        21,506            21,556
    Deferred revenue                                683               633
      Total liabilities                         237,825           240,887

    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,
     29,989,534 and 29,814,141 issued and
     outstanding, respectively                      300               298
    Additional paid-in capital                   69,514            71,112
    Retained earnings                           256,129           243,789
      Total stockholders' equity                325,943           315,199

      Total liabilities and stockholders'
       equity                                  $563,768          $556,086



                           MONACO COACH CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                     (Unaudited: in thousands of dollars,
                       except share and per share data)

                                                        Quarter Ended
                                                   March 31,       March 29,
                                                     2007            2008

    Net sales                                     $322,244          $252,377
    Cost of sales                                  286,248           236,571
     Gross profit                                   35,996            15,806

    Selling, general, and administrative
     expenses                                       32,358            28,636
    Operating income (loss)                          3,638           (12,830)

    Other income, net                                  113                87
    Interest expense                                  (967)             (725)
    Income (loss) from investment in
     joint venture                                    (278)              126
     Income (loss) before income taxes               2,506           (13,342)

    Provision for (benefit from) income
     taxes                                           1,007            (4,885)
     Net income (loss)                              $1,499           $(8,457)

    Earnings (loss) per common share:
     Basic                                           $0.05            $(0.28)
     Diluted                                         $0.05            $(0.28)

    Weighted-average common shares outstanding:
     Basic                                      29,829,697        29,746,479
     Diluted                                    30,405,671        30,127,263



                           MONACO COACH CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     (Unaudited: in thousands of dollars)

                                                         Quarter Ended
                                                   March 31,       March 29,
                                                     2007            2008

    Increase (Decrease) in Cash:

    Cash flows from operating activities:
       Net income                                   $1,499           $(8,457)
       Adjustments to reconcile net
       income to net cash provided by
       (used in) operating activities:
         Loss (gain) on sale of assets                (113)              164
         Depreciation and amortization               3,537             3,457
         Deferred income taxes                      (2,223)            1,212
         Stock-based compensation
          expense                                    1,826             2,098
         Net income from equity
          investment                                     0              (126)
         Changes in working capital
         accounts:
          Trade receivables, net                    (6,811)           15,600
          Inventories                               (2,134)           (2,955)
          Resort lot inventory                       1,214              (150)
          Prepaid expenses                             361               806
          Land held for development                      0            (2,836)
          Accounts payable                          35,345           (14,428)
          Product liability reserve                    745               864
          Product warranty reserve                     743              (919)
          Income taxes receivable                    9,458            (8,744)
          Accrued expenses and other
           liabilities                               3,019            (9,702)
          Deferred revenue                             (50)              (50)
          Discontinued operations                      (10)                0
           Net cash provided by
           (used in) operating
            activities                              46,406           (24,166)

    Cash flows from investing activities:
          Additions to property, plant,
           and equipment                            (1,770)             (637)
          Investment in joint venture                  (88)                0
          Proceeds from sale of assets                 505                11
           Net cash used in investing
            activities                              (1,353)             (626)

    Cash flows from financing activities:
          Book overdraft                           (16,626)              801
          Advance (payments) on lines
           of credit, net                           (2,036)           31,592
          Payments on long-term notes
           payable                                  (1,428)           (1,428)
          Debt issuance costs                         (193)               (8)
          Dividends paid                            (1,791)           (1,810)
          Issuance of common stock                     927               625
          Repurchase of common stock                     0            (2,829)
          Tax effect of stock-based
           award activity                              136              (352)
           Net cash provided by
           (used in) financing
            activities                             (21,011)           26,591

    Net change in cash                              24,042             1,799
    Cash at beginning of period                      4,984             6,282

    Cash at end of period                          $29,026            $8,081



                           Monaco Coach Corporation
                              Segment Reporting
  (Unaudited: in thousands of dollars, except average gross wholesale price)


    Results of Consolidated Operations
                                  Quarter                Quarter
                                   Ended                  Ended
                                  March 31,    % of      March 29,     % of
                                    2007       Sales       2008        Sales

    Net sales                     $322,244    100.00%    $252,377     100.00%
    Cost of sales                  286,248     88.83%     236,571      93.74%
     Gross profit                   35,996     11.17%      15,806       6.26%

    Selling, general and
     administrative expenses        32,358     10.04%      28,636      11.35%

    Operating income (loss)          3,638      1.13%     (12,830)     -5.08%

    Other income and interest
     expense                         1,132      0.35%         512       0.20%
    Income (loss) before income
     taxes                           2,506      0.78%     (13,342)     -5.29%

    Income tax provision (benefit)   1,007      0.31%      (4,885)     -1.94%

     Net income (loss)              $1,499      0.47%     $(8,457)     -3.35%

    Depreciation and amortization   $3,537                 $3,457
    Capital expenditures            $1,770                   $637
    Raw materials inventory        $76,722                $71,346
    WIP inventory                  $53,364                $54,364
    Finished goods inventory       $23,859                $35,481

    Total capital expenditures
     for 2008 are expected to
     be $7 to $8 million.

    Tax rate for 2008 is expected
     to be between 36% and 38%.


    Motorized Recreational Vehicle Segment


                                  Quarter                Quarter
                                   Ended                  Ended
                                  March 31,    % of      March 29,     % of
                                    2007       Sales       2008        Sales

    Net sales                     $245,548    100.00%    $194,737     100.00%
    Cost of sales                  219,061     89.21%     182,914      93.93%
     Gross profit                   26,487     10.79%      11,823       6.07%

    Selling, general and
     administrative expenses
     and corporate overhead         23,155      9.43%      20,443      10.50%
     Operating income (loss)        $3,332      1.36%     $(8,620)     -4.43%

    Units Sold
     Class A Diesel                  1,112                    773
     Class A Gas                       198                    262
     Class C                           150                    165
      Total                          1,460                  1,200

    Average Gross Wholesale Price
     Class A Diesel               $198,780               $211,495
     Class A Gas                   $78,662                $82,286
     Class C                       $53,040                $58,067

    Internal Retail Registrations
     Class A Diesel                  1,076                    775
     Class A Gas                       262                    215
     Class C                            73                    101
      Total                          1,411                  1,091

    Additional Information*
     Backlog units                                            459
     Backlog value                                        $65,760
     Dealer inventory (units)                               3,545
     Number of production lines                                 5
     Capacity utilization                                      57%
     Number of independent
      distribution points **                                  348

    *  As of 3/29/2008
    ** Includes Canadian Dealers


    Towable Recreational Vehicle Segment


                                  Quarter                Quarter
                                   Ended                  Ended
                                  March 31,    % of      March 29,     % of
                                    2007       Sales       2008        Sales

    Net sales                     $69,480     100.00%     $55,208     100.00%
    Cost of sales                  64,753      93.20%      52,471      95.04%
     Gross profit                   4,727       6.80%       2,737       4.96%

    Selling, general and
     administrative expenses
     and corporate overhead         6,372       9.17%       6,200      11.23%
     Operating loss               $(1,645)     -2.37%     $(3,463)     -6.27%

    Units Sold
     Travel trailer and fifth-wheel 3,259                   2,689
     Specialty trailer              1,030                     954
      Total                         4,289                   3,643

    Average Gross Wholesale Price
     Travel trailer and
      fifth-wheel                 $20,535                 $19,391
     Specialty trailer             $8,953                 $10,546

    Additional Information: Travel
    Trailer and Fifth-wheel*
     Backlog units                                          1,440
     Backlog value                                        $26,928
     Number of production lines                                 7
     Capacity utilization                                      43%
     Number of independent
      distribution points                                     602

    * As of 3/29/2008


    Motorhome Resorts Segment
                                  Quarter                Quarter
                                   Ended                  Ended
                                  March 31,    % of      March 29,     % of
                                    2007       Sales       2008        Sales

    Net sales                      $7,216     100.00%      $2,432     100.00%
    Cost of sales                   2,434      33.73%       1,186      48.77%
     Gross profit                   4,782      66.27%       1,246      51.23%

    Selling, general and
     administrative expenses
     and corporate overhead         2,831      39.23%       1,993      81.95%
     Operating income (loss)       $1,951      27.04%       $(747)    -30.72%

    Lots sold in period                29                      11
    Unsold developed lots              89                      51
    Project-to-date lots sold         718                     756
    Lots with deposits                 19                       1

    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, timeline to be established.

    Naples, FL
     Total expected lots in resort are 184, some of which will be available to
      sell third quarter of 2008.

    Bay Harbor, MI
     Total expected lots in resort are 130, some of which will be available to
      sell third quarter of 2008.
SOURCE  Monaco Coach Corporation
    -0-                             04/23/2008
    /CONTACT: Craig Wanichek, Director of Investor Relations of Monaco Coach
Corporation, +1-541-681-8029, craig.wanichek@monacocoach.com/
    /Photo: http://www.newscom.com/cgi-bin/prnh/19991018/MONACO
               AP Archive:  http://photoarchive.ap.org
               PRN Photo Desk, photodesk@prnewswire.com/
    /Web site:  http://www.monaco-online.com/
    (MNC)

CO:  Monaco Coach Corporation
ST:  Oregon
IN:  AUT
SU:  ERN CCA ERP

DE-EW
-- LAW054 --
0126 04/23/2008 06:00 EDT http://www.prnewswire.com
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Monaco Coach's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.