Monaco Coach Corporation Reports First Quarter Results

First quarter 2007 revenues were $322.2 million, down 16.3% compared to $385.1 million in revenues for the first quarter 2006. First quarter 2006 revenues included $26.8 million of FEMA specific sales. First quarter 2007 gross profit was $36.0 million, down from $48.4 million a year ago. Operating income for the first quarter 2007 was $3.6 million, compared to $14.5 million for the first quarter 2006. Net income for the first quarter 2007 was $1.5 million, compared to $8.3 million a year ago. For the first quarter 2007, diluted earnings per share were $0.05 versus $0.28 for the same period last year.

Kay Toolson, Chairman and Chief Executive Officer of Monaco Coach Corporation, stated, "We are pleased to report a profit for the quarter in the face of continuing challenges in the motorhome and towables markets. We are also encouraged by our internal Class A retail registrations, which showed a 4% increase for the first quarter of 2007, compared to the first quarter of 2006, and we are up 8% year-to-date through mid-April as compared to the same period last year. While we remain optimistic about improved demographics and long-term growth prospects for our company and the industry, rising fuel prices and lower consumer confidence give us reasons to be cautious in our short-term outlook."

"Our first quarter results reflect positive changes in our business, including consolidation of subassembly plants and the realignment of our production lines, which are beginning to pay off through improved quality and increased efficiencies in production and product development. We are confident the steps that we have taken have helped create a successful 2008 model line-up and will allow us to quickly respond to future market upturns," added Toolson.

Gross profit margin for the Company decreased in the first quarter 2007 to 11.2%, compared to 12.6% in the first quarter 2006. The decline in gross profit margin was partially the result of the absence of FEMA-related business, which benefited the towable segment in the first quarter 2006 by increased orders, and benefited the motorized segment through absorption of indirect expenses in the Company's Indiana motorized plant, where many of the FEMA units were built.

John Nepute, President of Monaco Coach Corporation, stated, "While total revenues for the Company fell short of target, our motorized segment did well, improving gross profit margins sequentially from the 8.2% in the fourth quarter 2006 to 10.8% in the first quarter 2007. As expected, progress was made in labor productivity and absorption of indirect expenses. We are also very encouraged by the improvement in quality, which resulted in a reduction of warranty expense."

"While our motorhome retail performance has been better than the overall motorhome RV market, we are still striving for one-to-one replacements on our dealer partners' lots. We are comfortable with the level of dealer inventory and, in part due to the reconfiguration of production and consolidation of motorized production lines, our overall backlog should continue to steadily diminish our need for promotional activity. The consolidation of similarly priced models on production lines has also resulted in a smoother transition into the new 2008 model year units."

Nepute concluded, "On the towables side, we saw our retail activity decline in the first quarter of 2007. Accordingly, we have adjusted run rates in our towable plants. This segment of the business is more scalable and additional cost-saving measures will be implemented to improve operating results. In spite of short-term market dynamics, we view this as a growing segment of our business and believe recent product offerings will enable us to gain market share and thereby increase efficiencies in our towable plants."

For the first quarter 2007, selling, general and administrative expenses were $32.4 million, compared to $34.0 million of sales for the first quarter 2006.

Marty Daley, Chief Financial Officer, stated, "Incrementally, as compared to fourth quarter 2006, selling, general and administrative expenses in the first quarter 2007 were impacted by an increase in settlement costs and stock- based compensation. The total of other selling, general and administrative expenses was consistent between fourth quarter 2006 and first quarter 2007."

Daley continued, "We've maintained our focus on the Company's balance sheet, and will continue to manage our backlog to keep our level of finished goods in balance with the market. We are pleased to have ended the quarter with a cash balance of $29 million and finished goods inventory just over $20 million."

Motorized Recreational Vehicle Segment

Motorized sales in the first quarter 2007 decreased 3.7% from $255.0 million in the first quarter 2006 to $245.5 million. Industry-wide Class A motorhome retail registrations, as reported by Statistical Surveys, Inc., were down 12.6% year-to-date through February 2007. The Company reported a 3.9% increase in market share for the same period.

Segment gross profit for the first quarter 2007 was $26.5 million, or 10.8% of sales, compared to $25.0 million, or 9.8% of sales, for the first quarter 2006. Selling, general and administrative expenses including corporate overhead were $23.2 million, compared to $20.1 million for the first quarter a year ago.

Unit sales of the Motorized RV Segment for the quarter ended March 31, 2007 totaled 1,460, down 9.6% from 1,615 units for the prior year period. Diesel Class A units shipped were 1,112 versus 1,143, gas Class A units shipped were 198 versus 357, and Class C units shipped were 150 versus 115.

Towable Recreational Vehicle Segment

The Company reported towable sales of $69.5 million for the first quarter 2007, compared to sales of $114.4 million for the first quarter 2006. Deducting FEMA sales in the first quarter of 2006 of $26.8 million, towable sales would have decreased 20.7%. Travel trailer and fifth-wheel registrations for the overall market, according to Statistical Surveys, reported a year-to-date decline of 8.5% through February 2007.

Gross margin for the first quarter 2007 for the towable segment was $4.7 million, or 6.8% of sales, compared to $14.3 million, or 12.5% of sales for the first quarter 2006. Selling, general and administrative expenses including corporate overhead were $6.4 million, compared to $9.4 million for the first quarter 2006.

For the first quarter 2007, towable unit sales were 4,289 units, down from 7,217 units for the same period a year ago, which included 2,019 FEMA related units.

Motorhome Resorts Segment

Resort sales for the first quarter 2007 were $7.2 million, down 54.0% from $15.7 million in the first quarter 2006. Continued poor weather in both Las Vegas, Nevada, and Indio, California, and extended road closures limiting access to the Las Vegas resort led to the reduction of lot sales. In the first quarter 2007, the Company sold 25 lots at the Indio resort and four lots at the Las Vegas resort. Currently 38 lots are available in Indio and 51 lots are available in Las Vegas. Operating income for the segment was $2.0 million, down from $4.8 million for the same period last year.

The Company has purchased additional land in the Palm Springs, California, area and very recently closed on a site in Naples, Florida. Both locations plan to have lots for sale by the beginning of 2008.

2007 Business Outlook

"The improvement from the fourth quarter 2006 to the first quarter 2007 was largely due to adjustments we made to our business model last year," said Daley. "While we have not observed the improvement in the retail market we were anticipating, at our current run rates and backlog, we will not be modifying our previously stated second quarter earnings expectations. However, if the originally anticipated uptick in the retail markets fails to materialize in the second half of the year, our 2007 fiscal year results will likely come in at the low end of our previously released guidance."

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