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Monaco Coach Corporation Reports Fourth Quarter and Fiscal Year 2002 Results

COBURG, Ore., Jan. 28, 2003; Monaco Coach Corporation today reported revenue and earnings for its fourth quarter and fiscal year ended December 28, 2002. Fourth quarter revenue increased approximately 15% to $300.7 million, versus $261.6 million for the same period a year ago. Operating income for the fourth quarter increased approximately 58% to $20.6 million, versus $13.0 million for the same period a year ago. Net income for the fourth quarter increased approximately 59% to $12.1 million, versus $7.6 million for the same period a year ago. Fourth quarter earnings per share increased approximately 58% to 41 cents, versus 26 cents for the same period a year ago.

For the fiscal year ended December 28, 2002, earnings per share were $1.51 on revenue of $1.22 billion, versus 85 cents on revenue of $937.1 million for the same period a year ago. Operating income for the fiscal year ended December 28, 2002 was $75.9 million, versus $42.7 million for the same period a year ago. Net income for the fiscal year ended December 28, 2002 was $44.5 million, versus $24.9 million for the same period a year ago.

"We remain bullish on our industry outlook, despite persistent economic challenges," stated Monaco Coach Corporation Chairman and Chief Executive Officer Kay Toolson. "While many market segments remain very competitive, we're focused intently on product development and market share in the gasoline and diesel-powered motorhome and towable market segments. Our towable production expansion project remains on track, and we should have additional towable production capacity available by mid-year."

Fourth quarter 2002 unit sales of Monaco Coach Corporation products increased by 10% to 2,677 units, up from 2,429 for the same period a year ago. Fourth quarter motorhome sales totaled 1,946 units and fourth quarter towable recreational vehicles totaled 731 units. Unit sales of Monaco Coach Corporation products for the fiscal year ended December 28, 2002 totaled 11,211 units, up from 9,491 for the same period a year ago. Fiscal-year motorhome sales totaled 8,005 units and fiscal-year towable recreational vehicles totaled 3,206 units. Year-end order backlog was approximately $230 million, compared to approximately $270 million at the close of the third quarter of 2002 and up from approximately $208 million a year ago.

According to Monaco Coach Corporation President John Nepute, "The retail market rebounded nicely in 2002. Barring prolonged military action or significant economic event, we anticipate similar industry growth in 2003. We worked diligently in 2002 to add distribution, particularly for our Safari and Beaver brands. We also introduced several new motorhomes in 2002, allowing us to grow shelf space on dealer lots."

Nepute continued, "Given the competitive conditions that exist, we are going to be more aggressive with retail sales promotions designed to increase market share and ensure that our models are turning on dealer lots. By carefully balancing production levels with demand, we believe we can grow our 2003 revenue by 8%-12%. Presently, we believe our first quarter 2003 revenue will increase at a more modest rate than our expectations for the full year."

Monaco Coach Corporation Vice President and Chief Financial Officer Marty Daley added, "We're pleased that our gross margin rose consistent with our expectations to 13.74% in the fourth quarter and that our sales, general and administrative expenses fell to 6.9% of sales during the fourth quarter. We presently anticipate gross margin and sales, general and administrative expenses in 2003 to average 13.75% and 7.4% respectively, reflecting our efforts to provide valuable retail promotions to our dealers and regain market share."

Daley added, "We're in line with our expectations regarding our investment with Outdoor Resorts of America (ORA) to develop two luxury recreational vehicle resorts. We expect to close the sale of undeveloped property in Naples, Florida, in the second quarter of this year. The net proceeds from the sale of the Florida property will reduce our debt associated with the ORA project by approximately $6.5 million. In Las Vegas, Nevada, we have sold 33 of 202 phase one developed lots, with 12 additional lots in escrow. At the Indio, California, location, we've received approval to begin closing on 21 of 136 phase one developed lots in escrow. Management at both locations report excellent interest from prospective lot buyers."

Headquartered in Coburg, Oregon, with additional manufacturing facilities in Indiana, Monaco Coach Corporation is one of the nation's leading manufacturers of recreational vehicles. The company offers customers luxury recreational vehicle models under the Monaco, Holiday Rambler, Safari, Beaver, McKenzie and Royale Coach brand names.

                           MONACO COACH CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                      (Unaudited: dollars in thousands)

                                                   December 29,   December 28,
                                                       2001           2002
    ASSETS
    Current assets:
     Trade receivables, net                          $82,885       $116,647
     Inventories                                     127,075        175,609
     Resort lot inventory                                 --         26,883
     Prepaid expenses                                  2,063          3,612
     Deferred income taxes                            27,327         33,379
      Total current assets                           239,350        356,130

    Notes receivable                                   8,157             --
    Property, plant and equipment, net               122,795        135,350
    Debt issuance costs, net                             940            683
    Goodwill, net of accumulated
     amortization of $5,320
     and $5,320, respectively                         55,856         55,254

      Total assets                                  $427,098       $547,417

    LIABILITIES
    Current liabilities:
     Book overdraft                                   $5,889         $3,518
     Line of credit                                   26,004         51,413
     Current portion of long-term note payable        10,000         21,667
     Accounts payable                                 66,859         78,055
     Product liability reserve                        19,856         21,322
     Product warranty reserve                         27,799         31,745
     Income taxes payable                                  0          4,536
     Accrued expenses and other liabilities           19,249         29,633
      Total current liabilities                      175,656        241,889

    Long-term note payable                            30,000         30,333
    Deferred income taxes                              8,312         14,568
                                                     213,968        286,790

    STOCKHOLDERS' EQUITY
    Common stock, $.01 par value; 50,000,000 shares
     authorized, 28,632,774 and 28,871,144
     issued and outstanding respectively                 286            289
    Additional paid-in capital                        48,522         51,501
    Retained earnings                                164,322        208,837
      Total stockholders' equity                     213,130        260,627

      Total liabilities and stockholders' equity    $427,098       $547,417


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

                                    Quarter Ended           Year Ended
                            December 29, December 28, December 29, December 28,
                                 2001         2002        2001*        2002

    Net sales                 $261,590     $300,667     $937,073   $1,222,689
    Cost of sales              229,440      259,329      823,083    1,059,560

     Gross profit               32,150       41,338      113,990      163,129

    Selling, general and
     administrative expenses    19,010       20,748       70,687       87,202
    Amortization of goodwill       161           --          645           --
     Operating income           12,979       20,590       42,658       75,927

    Other income, net               15           58          334          105
    Interest expense              (719)        (752)      (2,357)     (2,752)
     Income before income taxes 12,275       19,896       40,635       73,280

    Provision for income taxes   4,656        7,812       15,716       28,765

     Net income                 $7,619      $12,084      $24,919      $44,515


    Earnings per common share:
     Basic                       $ .27        $ .42        $ .87       $ 1.55
     Diluted                     $ .26        $ .41        $ .85       $ 1.51

    Weighted average common
     shares outstanding:
     Basic                  28,605,844   28,869,584   28,531,593   28,812,473
     Diluted                29,430,962   29,480,563   29,288,688   29,573,420

    * Includes results from Safari and Beaver divisions acquired on
      August 6, 2001


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

                                                            Year Ended
                                                      Dec 29,        Dec 28,
                                                       2001           2002
    Increase (Decrease) in Cash:

    Cash flows from operating activities:
     Net income                                      $24,919        $44,515
     Adjustments to reconcile net income
      to net cash provided (used) by
      operating activities:
      Gain on sale of assets                             (74)           178
      Depreciation and amortization                    7,543          8,585
      Deferred income taxes                            6,005         (1,574)
      Changes in working capital accounts:
       Trade receivables, net                        (13,154)       (33,932)
       Inventories                                    12,682        (48,534)
       Resort lot inventory                               --            (98)
       Prepaid expenses                                 (903)        (1,650)
       Accounts payable                              (10,318)        10,301
       Product liability reserve                      (1,639)         1,237
       Product warranty reserve                       (1,958)         3,835
       Income taxes payable                                0          9,597
       Accrued expenses and other liabilities         (2,123)         8,888
        Net cash provided by operating activities     20,980          1,348

    Cash flows from investing activities:
     Additions to property, plant and equipment      (10,210)       (18,735)
     Proceeds from sale of assets                        106            387
     Payment for business acquisition                (24,320)       (21,085)
     Issuance of notes receivable                     (5,357)          (385)
     Collections from notes receivable                    --            500

      Net cash used in investing activities          (39,781)       (39,318)

    Cash flows from financing activities:
     Book overdraft                                  (10,840)        (2,371)
      Payments) borrowings on lines of credit, net   (10,930)        25,414
     Borrowings on long-term note payable             40,000         22,000
     Payment on long-term note payable                    --        (10,000)
     Debt issuance costs                              (1,015)           (55)
     Issuance of common stock                          1,586          2,982
      Net cash provided by financing activities       18,801         37,970

    Net change in cash                                     0              0
    Cash at beginning of period                            0              0

    Cash at end of period                                 $0             $0