Monaco Coach Corporation Reports Third Quarter Results
COBURG, Ore., Oct. 28, 2005 -- Monaco Coach Corporation , one of the leading manufacturers of motorized and towable recreational vehicle products, today reported results for the third quarter ended October 1, 2005. Revenues for the third quarter were $297 million, approximately 17% lower than last year's third quarter record revenues of $358 million. The third quarter loss of $6 million or 20 cents per share, included a $1.5 million pre-tax cost associated with the relocation of Beaver manufacturing and a $1.6 million net of tax charge related to the discontinued operations of the Royale Coach bus conversion facility. This compares to net income of $7.4 million, or 25 cents per share for the third quarter of 2004. Third quarter 2005 motorhome sales totaled 1,500 units, towable sales totaled 1,287 units, and FEMA sales totaled 680 units, for a total of 3,467.
For the nine months ended October 1, 2005, earnings per share, on a diluted basis were break-even compared to $1.04 per share for the same period last fiscal year. Revenues for the nine months ended October 1, 2005 were $930 million, a 12.6% decrease from $1.06 billion for the first nine months of 2004. Net income for the nine months ended October 1, 2005 was $115 thousand, compared to $31.3 million earned for the comparable period in 2004. Unit sales of Monaco Coach Corporation products for the nine months ended October 1, 2005 totaled 9,303 units. Nine-month motorhome sales totaled 4,904 units, nine-month towable recreational vehicles totaled 3,719 units and nine-month FEMA units totaled 680 units.
"I am disappointed that our track record of 48 straight quarters of profitability since becoming a public company was disrupted," said Kay Toolson, Monaco Coach Chairman and CEO. "The quarter was impacted by a variety of events including the difficult wholesale markets, and the start-up of our Franchise for the Future initiative, which we believe going forward should create a more consistent retail and wholesale demand for our products at dealer lots. Additionally, we feel we have made the appropriate responses in our business, including our announced reduction in workforce and additional cost saving measures. We continue to believe in the compelling demographic trends for this industry and will strive to continue manufacturing the highest quality RV's for our owners."
"We have continued to focus on managing our production run-rates which has resulted in maintaining the overall integrity of the balance sheet," said John Nepute, Monaco Coach President. "Although the financial consequences were tough, our 2005 model year incentive promotions have helped move products off our dealer's lots which should bode well for us and our dealer partners in the future. The class A motorhome market however remains fiercely competitive."
Recreational Vehicle Segment
The RV segment reported sales of $289 million during the third quarter, down 18% from $353 million during the third quarter of 2004. Third quarter 2005 motorhome sales of 1500 units were down 28.9% compared to third quarter 2004, and third quarter towable sales of 1,287 units were up 2.6% compared to third quarter of 2004.
The RV segment reported gross profit of $20 million, or 6.8% of sales in the third quarter of 2005, compared to $41 million or 11.7% of sales in the third quarter of 2004. "The motorized market has been tough across the board, but particularly in the low-end diesel and high-end gas markets," said Mike Snell Vice President of Sales and Marketing for Monaco Coach.
Net sales for the RV segment in the first nine months of 2005 were $905 million, a 13.7% decline from $1 billion last year. Gross profit for the first nine months of 2005 declined to $77 million or 8.5% of sales versus 12.0% of sales and $126 million last year.
"Over the past few quarters, we have placed an emphasis on increasing sales of our towable products, and we are pleased that our eight month retail towable units sold were up 23%, excluding the FEMA units," said Mike Snell. "The market response to our lighter-weight, less expensive travel trailers and toy-haulers has been excellent.
Our Franchise for the Future program has had a very strong reception, with virtually all of our dealers signed up for the program. Monaco, Holiday Rambler, Beaver and Safari motorhomes will now be highlighted in distinctive areas at the majority of dealer lots by name, logo and key benefits, differentiating the value of Monaco Coach's products from the competition."
Motorhome Resorts Segment
"The motorhome resorts part of our business continues to be strong," said Nepute. "Demand for quality RV Resorts remains robust in the Southern California and Las Vegas areas."
Sales for the third quarter were $8 million up from $4.5 million for the third quarter of 2004. Gross profit for the segment was $5 million, up from $2 million for the same period last year.
Through the first nine months of 2005, the motorhome resorts segment reported sales of $25.7 million, up from sales of $16.8 million during the first nine months of 2004. Gross profit for the segment increased to $16.6 million, up from $7 million for the first nine months of 2004.
Financial Results and Outlook
"The results for the quarter were primarily impacted by lower than expected sales," said Monaco Coach Vice President and Chief Financial Officer, Marty Daley. "This was largely the result of holding the line on discounting prices at the end of the quarter. In addition, the lower corresponding level of production resulted in higher indirect and selling, general and administrative expenses as a percentage of sales. Also, retail promotions were increased significantly during the quarter, both sequentially and year-over-year, to assist in the sales of 2005 products from our dealer's lots.
We expect to generate fourth quarter revenues of approximately $300 million - $310 million," said Daley. "At that level of sales, combined with implemented cost saving initiatives, the Company's financial results should be near break-even."
"Looking at the year ahead, we anticipate fiscal 2006 will remain somewhat challenging, in particular the first half of the year," said Daley. "We expect sales levels to be approximately $1.275 billion to $1.325 billion for the year. Even with the uncertain retail markets we believe our dealer inventory is in good shape and wholesale sales should approximate retail sales in 2006. Consolidated gross profit margin should range between 11.0% and 11.3% and selling, general, and administrative expenses will range between 8.75% and 9%."
Monaco Coach Corporation will conduct a conference call in conjunction with this news release at 2:00 p.m. Eastern on Friday, October 28, 2005. 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 conference call will be archived and available for replay for the next 90 days.
Headquartered in Coburg, Oregon, with additional manufacturing facilities in Indiana, Monaco Coach Corporation employs more than 5,200 people and is one of the nation's leading manufacturers of recreational vehicles. The Company offers entry-level priced towable RVs up to custom made luxury recreational vehicle models under the Monaco, Holiday Rambler, Safari, Beaver and McKenzie brand names. For additional information about Monaco Coach Corporation, please visit www.monaco-online.com.
MONACO COACH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited: dollars in thousands) January 1, October 1, 2005 2005 ASSETS Current assets: Trade receivables, net $127,380 $99,376 Inventories 169,777 178,437 Resort lot inventory 7,315 7,887 Prepaid expenses 5,190 4,450 Income taxes receivable 0 5,144 Deferred income taxes 33,188 32,797 Total current assets 342,850 328,091 Property, plant, and equipment, net 141,563 143,062 Debt issuance costs net of accumulated amortization of $661 and $636, respectively 571 480 Goodwill 55,254 55,254 Total assets $540,238 $526,887 LIABILITIES Current liabilities: Book overdraft $1,587 $2,888 Line of credit 34,062 12,715 Accounts payable 79,072 87,666 Product liability reserve 20,233 19,676 Product warranty reserve 32,369 29,279 Income taxes payable 2,087 0 Accrued expenses and other liabilities 31,533 38,677 Total current liabilities 200,943 190,901 Deferred income taxes 19,679 20,193 Total liabilities 220,622 211,094 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, 29,425,787 and 29,557,074 issued and outstanding, respectively 294 296 Additional paid-in capital 57,454 58,826 Retained earnings 261,868 256,671 Total stockholders' equity 319,616 315,793 Total liabilities and stockholders' equity $540,238 $526,887 MONACO COACH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited: dollars in thousands, except share and per share data) Quarter Ended Nine-Months Ended October 2, October 1, October 2, October 1, 2004 2005 2004 2005 Net sales $357,762 $296,953 $1,064,756 $930,278 Cost of sales 314,335 272,334 931,830 836,776 Gross profit 43,427 24,619 132,926 93,502 Selling, general, and administrative expenses 30,805 30,514 81,733 86,451 Plant relocation costs 0 1,480 0 3,832 Operating income (loss) 12,622 (7,375) 51,193 3,219 Other income, net 43 15 256 155 Interest expense (370) (271) (1,147) (943) Income (loss) before income taxes and discontinued operations 12,295 (7,631) 50,302 2,431 Provision for income taxes, continuing operations 4,709 (3,227) 18,869 458 Loss from discontinued operations, net of tax provision (150) (1,559) (126) (1,858) Net income (loss) $7,436 $(5,963) $31,307 $115 Earnings per common share: Basic from continuing operations $ 0.26 $(0.15) $1.07 $ 0.06 Basic from discontinued operations (0.01) (0.05) 0.00 (0.06) Basic $ 0.25 $(0.20) $1.07 $ 0.00 Diluted from continuing operations $ 0.25 $(0.15) $1.04 $ 0.06 Diluted from discontinued operations 0.00 (0.05) 0.00 (0.06) Diluted $ 0.25 $(0.20) $1.04 $ 0.00 Weighted average common shares outstanding: Basic 29,410,086 29,545,315 29,354,598 29,502,539 Diluted 29,962,722 29,868,628 29,981,063 29,862,363 MONACO COACH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited: dollars in thousands) Nine Months Ended October 2, October 1, 2004 2005 Increase (Decrease) in Cash: Cash flows from operating activities: Net income from continuing operations $31,433 $1,973 Adjustments to reconcile net income to net cash (used) provided by operating activities: Loss on sale of assets 240 12 Depreciation and amortization 8,006 7,764 Deferred income taxes 832 905 Changes in working capital accounts: Trade receivables, net (40,134) 29,372 Inventories (32,314) (4,891) Resort lot inventory 5,737 1,219 Prepaid expenses (2,678) 732 Accounts payable 31,857 11,727 Product liability reserve (128) (557) Product warranty reserve 4,350 (3,025) Income taxes payable 3,508 (6,612) Accrued expenses and other liabilities 6,284 6,046 Net cash provided by operating activities 16,993 44,665 Cash flows from investing activities: Additions to property, plant, and equipment (7,060) (11,009) Proceeds from sale of assets 1,927 72 Net cash used in investing activities (5,133) (10,937) Cash flows from financing activities: Book overdraft 0 1,301 Payments on lines of credit, net 0 (21,347) Payments on long-term notes payable (11,250) 0 Debt issuance costs (66) (39) Dividends paid (4,404) (5,312) Issuance of common stock 1,912 1,374 Net cash used by financing activities (13,808) (24,023) Net change in cash (1,948) 9,705 Net cash used by discontinued operations (2,712) (9,705) Cash at beginning of period 13,066 0 Cash at end of period $8,406 $0 Monaco Coach Corporation Segment Reporting Results of Consolidated Operations Quarter Quarter Ended % of Ended % of Oct. 2, 2004 Sales Oct. 1, 2005 Sales Net Sales $357,762 100.00% $296,953 100.00% Cost of Sales 314,335 87.86% 272,334 91.71% Gross Profit 43,427 12.14% 24,619 8.29% Selling, General and Administrative Expenses 30,805 8.61% 30,514 10.28% Plant Relocation Costs 0 0.00% 1,480 0.50% Operating Income (Loss) 12,622 3.53% (7,375) -2.48% Other Income and Interest Expense 327 0.09% 256 0.09% Income Before Income Taxes 12,295 3.44% (7,631) -2.57% Income Taxes 4,709 1.32% (3,227) -1.09% Net Income (Loss) from Continuing Operations 7,586 2.12% (4,404) -1.48% Loss from Discontinued Operations, Net of Tax Provision (150) -0.04% (1,559) -0.52% Net Income (Loss) $ 7,436 2.08% $(5,963) -2.01% Recreational Vehicle Segment Quarter Quarter Ended % of Ended % of Oct. 2, 2004 Sales Oct. 1, 2005 Sales Net Sales $353,288 100.00% $289,002 100.00% Cost of Sales 311,918 88.29% 269,357 93.20% Gross Profit 41,370 11.71% 19,645 6.80% Selling, General and Administrative Expenses 16,602 4.70% 19,594 6.78% Corporate Overhead Allocation 12,066 3.42% 8,279 2.86% Plant Relocation Costs 0 0.00% 1,480 0.51% Operating Income (Loss) $12,702 3.60% $(9,708) -3.36% Motorhome Resorts Segment Quarter Quarter Ended % of Ended % of Oct. 2, 2004 Sales Oct. 1, 2005 Sales Net Sales $ 4,474 100.00% $7,951 100.00% Cost of Sales 2,417 54.02% 2,977 37.44% Gross Profit 2,057 45.98% 4,974 62.56% Selling, General and Administrative Expenses 796 17.79% 1,721 21.65% Corporate Overhead Allocation 1,341 29.97% 920 11.57% Operating Income (Loss) $(80) -1.78% $2,333 29.34% Monaco Coach Corporation Segment Reporting Results of Consolidated Operations Nine-Months Nine-Months Ended % of Ended % of Oct. 2, 2004 Sales Oct. 1, 2005 Sales Net Sales $ 1,064,756 100.00% $930,278 100.00% Cost of Sales 931,830 87.52% 836,776 89.95% Gross Profit 132,926 12.48% 93,502 10.05% Selling, General and Administrative Expenses 81,733 7.68% 86,451 9.29% Plant Relocation Costs 0 0.00% 3,832 0.41% Operating Income (Loss) 51,193 4.81% 3,219 0.35% Other Income and Interest Expense 891 0.08% 788 0.08% Income Before Income Taxes 50,302 4.72% 2,431 0.26% Income Taxes 18,869 1.77% 458 0.05% Net Income (Loss) from Continuing Operations 31,433 2.95% 1,973 0.21% Loss from Discontinued Operations, Net of Tax Provision (126) -0.01% (1,858) -0.20% Net Income (Loss) $31,307 2.94% $115 0.01% Recreational Vehicle Segment Nine-Months Nine-Months Ended % of Ended % of Oct. 2, 2004 Sales Oct. 1, 2005 Sales Net Sales $ 1,047,924 100.00% $904,577 100.00% Cost of Sales 922,105 87.99% 827,627 91.49% Gross Profit 125,819 12.01% 76,950 8.51% Selling, General and Administrative Expenses 41,811 3.99% 66,786 7.38% Corporate Overhead Allocation 33,203 3.17% 12,523 1.38% Plant Relocation Costs 0 0.00% 3,832 0.42% Operating Income (Loss) $50,804 4.85% $(6,191) -0.68% Motorhome Resorts Segment Nine-Months Nine-Months Ended % of Ended % of Oct. 2, 2004 Sales Oct. 1, 2005 Sales Net Sales $16,832 100.00% $25,701 100.00% Cost of Sales 9,725 57.78% 9,149 35.60% Gross Profit 7,107 42.22% 16,552 64.40% Selling, General and Administrative Expenses 3,029 18.00% 5,751 22.38% Corporate Overhead Allocation 3,689 21.92% 1,391 5.41% Operating Income (Loss) $389 2.31% $9,410 36.61%