Rexhall Industries Announces 14th Consecutive Quarter of Profitability

    LANCASTER, Calif.--Aug. 14, 2001--Rexhall Industries Inc. today announced that it was profitable for the 14th consecutive quarter.
    Consolidated net revenues for the six months ended June 30, 2001, increased 2.4% to $36,362,000 from $35,495,000 for the same period in 2000. Gross profit for the six months decreased 11.5% from $5,076,000 to $4,494,000.
    Net income for the period was $251,000, or $0.08 per diluted share, compared with net income of $1,324,000 or $0.42 per diluted share last year.
    For the second quarter ended June 30, 2001, consolidated net revenues increased 20.4% to $17,979,000 from $14,936,000, while gross profit increased 14.2% to $2,145,000 from $1,878,000. Net income for the quarter was $132,000, or $0.04 per diluted share, compared with net income of $360,000 or $0.11 per diluted share last year.
    "Our industry is still being affected by poor economic fundamentals. In the last 12 consecutive months, the industry has shipped 34,400 Class 'A' motorhomes. We haven't seen shipments that low since the mid-'90s," stated William J. Rex, Chief Executive Officer. "These conditions have also made it very challenging for our retail operations in Arizona. We started our retail operations as a response to the bankruptcy of our largest dealer last year, however, we haven't achieved the results we expected. Part of the problem is Arizona's primary selling season is October to April, but last season was very poor due to the slowing economy and the drawn-out presidential election. The rest of the problem is that we started up too big, too quickly, and with the poor season wound up with too much inventory and overhead. We have made significant cost reductions in the last few months; last week we hired a new general manager for the retail operations. Retail operations have been a drag on our earnings of about $0.07 per diluted share this year, though we believe that the losses would have been greater had we simply dumped the inventory at the time of repurchasing it. We also feel certain that the new direction will allow us to have a much better season this year."
    "Class 'A' shipments industry-wide were down 28% for the first half and down 20% for the second quarter of 2001 when compared to last year. Rexhall's manufacturing sales were only down 18% for the first half, and actually increased 3% for the second quarter, so we have gained market share from 2.1% in 2000 to 2.4% year to date," added Michael Bourne, Chief Operating Officer. "However, most of our gains are in markets west of the Rockies, which is why I have spent significant time evaluating our selling and marketing strategies for markets east of the Rockies. We have recently made changes to our sales force and their compensation structure, as well as realigning our eastern territories better geographically. All of this was to stimulate our sales force into achieving our desired market share goals in their respective territories. We are also very pleased with how well our 2002 models have been received, which just started shipping a week or so before the quarter end. So with our new selling and marketing strategies, our outstanding 2002 models, and some other things we have in the pipeline, we are very excited about our opportunities for Rexhall and its shareholders, especially when economic conditions improve."
    Rex concluded, "While we improved slightly from the first quarter, we are not satisfied to just wait until the economy picks up. We are making prudent changes to our management team, our compensation structures, and our products. We will continue to strive to offer our customers the best value in the marketplace. With the dedication and determination our employees showed in getting us back into production after the fire in July, we should be able to achieve our goal of enhancing shareholder value."

                                             Three Months Ended:
                                       June 30, 2001    June 30, 2000

Net Revenues                               $  17,979        $  14,936
Cost of Sales                                 15,834           13,058
Gross Profit                                   2,145            1,878

Selling, General and Administrative
  Expenses and Other Income and Expenses       1,923            1,223
Earnings Before Income Taxes                     222              655
Income Tax Expense                                90              295
Net Earnings                               $     132        $     360
Basic and Diluted Earnings Per Share       $    0.04        $    0.11

                                                 Six Months Ended:

Net Revenue                                $  36,362        $  35,495
Cost of Sales                                 31,868           30,419
Gross Profit                                   4,494            5,076
Selling, General and Administrative
  Expenses and Other Income and 
  Expenses                                     4,071            2,766
Earnings Before Income Taxes                     423            2,310
Income Tax Expense                               172              986
Net Earnings                               $     251        $   1,324
Basic and Diluted Earnings Per Share       $    0.08        $    0.42