Monaco Coach Corporation Reports Record Quarterly Revenues

COBURG, Oregon, April 26 -- Monaco Coach Corporation , one of the nation's leading manufacturers of recreational vehicles, today reported revenue and earnings for the first quarter ended April 1, 2006.

First quarter 2006 revenues were $385.1 million, up 17% compared to $328.8 million in revenues for the first quarter of 2005. First quarter gross profit was $48.4 million, up from $35.9 million a year ago. Operating income for the first quarter increased to $14.5 million compared to $8.9 million for the first quarter of 2005. Net income for the first quarter of 2006 was $8.3 million compared to $5.3 million a year ago. For the first quarter of 2006, diluted earnings per share were $0.28 versus $0.18 for the same period last year.

Kay Toolson, Chairman and Chief Executive Officer stated, "We are extremely pleased to report that the efforts of our teams in each business segment resulted in operating profits across the board: motorized, towables and motorhome resorts. In particular, the motorized division faced the continuation of difficult market conditions throughout the quarter but was still able to produce operating profits of nearly $5 million. On the towable side, the addition of R-Vision to our portfolio of brands was accretive to our revenue and profits in the first quarter.

Going forward, we will continue to align the Company with the markets. We are confronting our challenges head on and are in the process of implementing the following changes to strengthen our competitive position, not only for today's market but also for the long-term:

  * Idling a motorized production line in Coburg, Oregon, which will reduce
    motorized capacity 55 units per week;

  * Redeploying production of those units to Wakarusa, Indiana, which will
    consolidate manufacturing of all lower-priced motorized units in
    Indiana;

  * Moving production of our mid-priced diesel units from Indiana to one of
    our two remaining manufacturing production lines in Coburg, Oregon,
    which will consolidate manufacturing of all our higher-priced motorized
    units in Oregon; and

  * Beginning production of R-Vision towable products on the idled motorized
    line in Coburg, Oregon which will substantially reduce our distribution
    costs of these products to our western markets."

John Nepute, President stated, "The net effect of these moves will be an overall reduction of motorized capacity by roughly 55 units per week and an increase in towable capacity of approximately 100 units per week. The ability to manufacture like-priced units and simplify chassis operations in both locations should increase quality and efficiency in each of the plants, providing greater value to our owners and dealer partners. By initiating towable production in Oregon, we can deliver these products less expensively to the strong west coast market while giving us the opportunity to introduce new models in our Indiana towable facilities. These changes, while positioning us positively for the future, will require an expenditure of $1.5-$2.0 million that will be expensed over the next two quarters."

Nepute concluded, "We remain confident in our ability to manage through the challenges in the motorhome markets. We will also continue to invest in areas that have performed well for us recently, such as, our Motorhome Resorts Segment and our towable operations. We also plan to develop a closer working relationship with our dealer partners through enhancements to our Franchise for the Future initiative. The underlying demographics of our businesses remain strong, our balance sheet is healthy and our employees are focused on maintaining our brand position as manufacturers of the highest quality recreational vehicles in the industry."

Consolidated Results from Operations

Gross profit for the Company increased in the first quarter of 2006 to 12.6%, compared to 10.9% in the first quarter of 2005. This was the result of strong margins in the Motorhome Resorts Segment and the Towable Segment. FEMA-related business helped the Company in two ways: the Towable Segment benefited from FEMA orders produced at R-Vision and the Motorized Segment benefited from increased utilization in our Indiana plant. Gross margins also continued to improve sequentially due to lower material rates and reductions in overhead costs. In addition, indirect absorption also improved, in part, because of the reduction in our non-production workforce last year.

For the first quarter of 2006, selling, general and administrative expenses were 8.8% of sales compared to 8.2% for the first quarter of 2005. However, this compares favorably to the fiscal year 2005 selling, general and administrative expense of 9.2%. Reductions in settlement costs, marketing and promotion expenses were offset by incentive compensation due to increased profitability. Personnel costs also increased as stock-based compensation began to be expensed in the first quarter. Interest expense increased as the result of higher levels of debt associated with the purchase of R-Vision.

Motorized Recreational Vehicle Segment

Success and acceptance of the Franchise for the Future program together with balanced inventories at the beginning of the year resulted in the Company gaining shelf space at our dealer partners' locations in the first quarter. While motorized sales in the first quarter of 2006 decreased 12.1% over the first quarter of 2005, the decline was symptomatic of the overall motorized retail market. According to the Recreation Vehicle Industry Association, Class A motorhome wholesale shipments were down 20.6% through February. The decline in shipments corresponds to the 25% drop in retail registrations for Class A units through the same period.

Segment gross profit for the first quarter of 2006 was $25.0 million or 9.8% of sales compared to $30.9 million and 10.6% of sales for the first quarter of 2005. As expected, the reduced sales levels led to lower absorption of indirect costs in the manufacturing plants. Selling, general and administrative expenses directly attributable to motorized operations decreased in actual dollars to $8.5 million compared to $10.3 million for the first quarter 2005. The reduction was the result of reduced motorized marketing and selling expenses. Unit sales of the Motorized RV Segment for the quarter ended April 1, 2006 totaled 1,615 down 9.9% from 1,793 units for the prior year period. Diesel Class A units shipped were 1,143 versus 1,315, gas Class A units shipped were 357 versus 420 and Class C units shipped were 115 versus 58.

Towable Recreational Vehicle Segment Results

Towable sales increased 243% to $114.4 million for the first quarter of 2006 compared to sales of $33.4 million in last year's first quarter. The increase was primarily due to the addition of R-Vision and the completion of FEMA orders. R-Vision's incremental sales contribution was $60.4 million, including $14.2 million related to FEMA. In addition, 874 FEMA units that were manufactured on a previously idled production line in Wakarusa generated $11.8 million of revenue. Gross margin for the first quarter of 2006 for the Towable Segment was $14.3 million or 12.5% of sales, a significant improvement from $1.6 million or 4.9% of sales for the first quarter of 2005. Manufacturing and material efficiencies improved due to the increased utilization of plants and materials. Selling, general and administrative expenses directly attributable to the segment increased to $3.6 million compared to $1.2 million for the first quarter 2005, primarily due to volume.

For the first quarter of 2006, towable unit sales were 7,217 units, up from 1,227 units for the same period a year ago, which did not include R-Vision. Holiday Rambler and McKenzie unit sales net of FEMA increased to 1,429 in the first quarter of 2006, up 16.5% from 1,227 for the first quarter of 2005. For the first quarter of 2006, R-Vision's 4,914 units included 1,145 FEMA units.

Motorhome Resorts Segment

Resort sales for the first quarter of 2006 were $15.7 million, up 196.6% from $5.3 million in the first quarter of 2005, significantly exceeding the Company's expectations. Demand for motorhome resort lots continues to be robust. In the first quarter of 2006, the Company sold 17 lots at the Las Vegas resort and 61 lots at the Indio, California resort. Currently 89 lots are available in Las Vegas and 26 are available in Indio. The final phase of the Indio resort is currently under construction and the remaining 86 lots will be available by fall of 2006. Gross profit for the segment was $9.2 million, up from $3.4 million for the same period last year.

The Company continues to believe that the construction of additional upscale resorts is necessary to support the thousands of new recreational vehicle owners that are entering the market each year. In order to pursue this opportunity we are currently evaluating potential sites in Florida, the Carolinas and California.

2006 Business Outlook

Marty Daley, Chief Financial Officer stated, "The improvement from the fourth quarter of 2005 to the first quarter of 2006 was largely the result of adjustments to our business model and execution of these changes by all of our employees, as well as the benefit of FEMA orders. Looking ahead, we expect the motorhome market to remain difficult over the next couple of quarters. Consumers are facing higher fuel prices and the rise in interest rates could dampen retail purchases as well as dealers' desire to floor additional products."

During the second quarter of 2006, the Company expects that the recreational vehicle segments will experience typical seasonal increases. Second quarter 2006 sales are forecast to be $375 million to $385 million with gross profit margins in the range of 10.15% to 10.45% and selling, general and administrative expense in the range of 8.05% to 8.2%.

Full year 2006 sales are forecast to be in the range of $1.45 to $1.48 billion. Consolidated gross profit margin should be in the 10.4% to 10.55% range and selling, general and administrative expense should fall between 8.2% and 8.35%.

About Monaco Coach Corporation

Monaco Coach Corporation is one of the nation's leading manufacturers of 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 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 http://www.monaco-online.com/ or www.trail-lite.com.