Monaco Coach Corporation Reports Second Quarter Results

COBURG, Ore., July 26 -- Monaco Coach Corporation , one of the nation's leading manufacturers of motorized and towable recreational vehicles, today reported results for the second quarter ended July 1, 2006.

Revenues for the second quarter were $321.3 million, representing an increase of approximately 5.2% above last year's second quarter revenues of $304.5 million. Results for the second quarter 2006 include the R-Vision business acquired in November 2005. Second quarter net income of $372,000, or one cent per share, which included a $107,000 loss related to the discontinued operations of the Royale Coach bus conversion facility, compares to net income of $755,000, or three cents per share, for the second quarter of 2005.

For the six months ended July 1, 2006, earnings per share on a diluted basis were 29 cents, compared to 20 cents per share for the same period last fiscal year. Revenues for the six months ended July 1, 2006 were $706.4 million, an 11.5% increase from $633.3 million for the first six months of 2005. Net income for the six months ended July 1, 2006 was $8.7 million, compared to $6.1 million earned for the comparable period in 2005.

"Strength in the towable and resorts segments during the second quarter mitigated some of the challenges we faced in the motorized business," said Kay Toolson, Chairman and CEO of Monaco Coach Corporation. "Lower consumer confidence resulting from rising interest rates and high fuel prices limited dealer ordering, negatively affecting sales of motorhomes in the quarter. However, we have made changes in our capacity utilization that we believe will help us generate improving results over the next two quarters."

"The new production configuration for our various models provides the Company much greater flexibility to build to market demand, and assists our dealer partners in maintaining the proper mix of models on their lots," said Toolson. "These manufacturing changes did impact efficiencies in our plants in the second quarter, but we believe these challenges should be behind us by the end of this quarter."

Motorized Recreational Vehicle Segment

The Motorized RV Segment reported sales of $225.6 million during the second quarter. Second quarter 2006 motorhome sales of 1,408 units were down 12.3% compared to second quarter 2005. The Motorized RV Segment reported gross profit of $15.9 million, or 7.0% of net sales in the second quarter of 2006.

"Our recent Dealer Congress, where we introduced the 2007 model year line-up to our dealer body, was extremely positive," said John Nepute, President of Monaco Coach Corporation. "We are focused on delivering new products at the price points where there have been positive trends, including low priced class B's and C's, and low to mid-priced diesels."

Net sales for the Motorized RV Segment in the first six months of 2006 were $480.6 million. Gross profit for the first six months of 2006 was $41.0 million, or 8.5% of net sales.

Towable Recreational Vehicle Segment

The Towable RV Segment reported sales of $89.2 million during the second quarter. Gross profit for the segment was $9.6 million, or 10.8% of net sales. Second quarter 2006 results include the R-Vision group. Second quarter 2006 towable sales were 5,617 units, including 4,411 R-Vision units.

"Sales contributions and higher margins from the R-Vision business continued to positively impact sales and profitability in the Towable RV Segment. In the second quarter, the segment's strong margins were the result of high utilization in the R-Vision plants and acceptance of their lightweight, less expensive travel trailers," said Nepute.

Net sales for the Towable RV Segment in the first six months of 2006 were $203.6 million. Gross profit for the first six months of 2006 was $23.8 million, or 11.7% of net sales.

Motorhome Resorts Segment

Net sales for the second quarter were $6.4 million down from $12.5 million for the second quarter of 2005. Gross profit for the Motorhome Resorts Segment was $5.0 million, down from $8.2 million for the same period last year.

"The demand for motorhome resorts remains extremely positive," said Nepute. "The reduction in sales volume in this segment during the quarter was typical for the season. Second quarter 2005 net sales included normal seasonal sales plus released lots that had been reserved with deposits in the first quarter 2005."

During the first six months of 2006, the Motorhome Resorts Segment reported sales of $22.1 million, up from sales of $17.8 million during the first six months of 2005. Gross profit for the segment increased to $14.2 million, up from $11.6 million for the first six months of 2005.

Monaco Coach Corporation is pleased to announce the expansion of its motorhome resort business with the acquisition of land for two new motorhome resort properties. The Company purchased approximately 80 acres near La Quinta, California and has agreed to terms on 24 acres in Naples, Florida. Lots are expected to be ready for sale at both locations in late 2007 or early 2008.

"Our recent motorhome resort experience suggests that Southern California and in particular the Palm Springs area has excellent demand for the type of resorts and lots that we are developing," said Toolson. "When completed, the La Quinta, California project will be comprised of approximately 400 lots."

"Likewise, we believe the Naples, Florida, area is ripe for this type of development and we are extremely pleased to enter this market with a top quality location. The Naples project is expected to contain roughly 200 lots and will have direct access to the Gulf of Mexico."

Consolidated Financial Results and Outlook

"The strong motorhome resorts results and contribution from towables did not offset lower than expected motorhome sales and higher than expected sales incentives, all of which led to the lower quarterly gross profit," said Marty Daley, Monaco Coach Corporation Vice President and Chief Financial Officer. "We are pleased that second quarter selling, general and administrative expenses decreased to 9.2% of net sales, compared to 9.5% of net sales for second quarter last year, and we will continue to work on initiatives aimed to reduce these expenses further."

"We expect to generate third quarter net sales of approximately $330 million - $340 million. Increases in motorhome sales should help offset typical seasonal declines in the towables and resorts segments," said Daley. "We anticipate that the third quarter will remain challenging; consolidated gross profit margin should range between 8.25% and 8.75%, and selling, general and administrative expenses will range between 8.0% and 8.5%."

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 Corporation employs approximately 6,000 people. Monaco Coach offers entry-level priced towable RVs up to custom made luxury recreational vehicle models under the Monaco, Holiday Rambler, Safari, Beaver, McKenzie and R-Vision brand names. Monaco Coach maintains RV service centers in Harrisburg, OR, Elkhart, IN and Wildwood, FL.

Ranked number one in the manufacturing of diesel powered motorhomes in the industry, Monaco Coach is a leader in innovative RV design 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 www.monaco-online.com or www.trail-lite.com.