Monaco Coach Corporation Reports Second Quarter Profits

COBURG, Ore., July 25 -- Monaco Coach Corporation , one of the nation's leading manufacturers of recreational vehicles, today reported revenues and earnings for the second quarter ended June 30, 2007.

Second quarter 2007 revenues were $335.3 million, up 4.4% compared to $321.3 million in revenues for the second quarter of 2006. The Company reported a higher gross profit of $36.6 million for the second quarter of 2007, compared to $30.5 million a year ago. Operating income for the second quarter of 2007 was $8.7 million, compared to $793,000 for the second quarter of 2006. Net income for the second quarter of 2007 was $4.5 million, compared to $372,000 a year ago. For the second quarter of 2007, diluted earnings per share were $0.15 versus $0.01 for the same period last year.

For the six months ended June 30, 2007, revenues were $657.6 million, compared to $706.4 million for the first half of 2006. The Company reported net income of $6.0 million for the recent six-month period, compared to $8.7 million for the same period in 2006. Earnings per share on a diluted basis for the first six months of 2007 were $0.20, compared to $0.29 for the same period last year.

"Our Class A retail results remained positive, despite continuing challenges in the domestic motorhome market," said Kay Toolson, Chairman and Chief Executive Officer of Monaco Coach Corporation. "Internal reports show our Class A business was up over 6% year-to-date through the quarter, compared to the overall Class A market, which was down 6.6% through May, according to the most recently reported industry data. These market share gains, along with improving margins and steady consumer demand through the first six months of 2007 in the motorhome segment, has strengthened our confidence in the retail market for our products. Improvements in our towable product line-up are helping us gain back market share in this segment. Our overall business approach remains one of flexibility and sensitivity to changing economic conditions, consumer confidence and retail sell-through."

Gross profit margin for the Company increased in the second quarter of 2007 to 10.9%, compared to 9.5% in the second quarter of 2006. The higher gross profit margin was due to reductions in wholesale discounting, improvements in plant utilization, and additional savings in some direct costs. These improvements offset higher material costs due to changes in product mix, as the Company grew its output of mid-priced diesel products.

"Our June Dealer Congress was a significant success," stated John Nepute, President of Monaco Coach Corporation. "Dealers were very positive on our new 2008 models. Like our dealers, we expect our 2008 product line-up to be extremely popular with our retail customers."

"We have paid close attention to retail demand, and that has enabled us to consistently build the proper mix of models for our dealer partners and manage our level of finished goods inventory. The equilibrium created has lessened the need to provide discounts or special incentives," said Nepute. "Additionally, as expected, the changes and moves we made in our production configuration and capacity last year have helped us become more efficient in our manufacturing processes. We expect to see further plant efficiencies associated with the consolidation of towable manufacturing from Elkhart to two existing facilities in the fourth quarter of 2007."

For the second quarter of 2007, selling, general and administrative expenses were reduced by 5.3% to $27.9 million, compared to $29.4 million for the second quarter of 2006.

"Reductions in retail promotional activity and settlement and legal costs positively impacted selling, general and administrative expenses as compared to the second quarter last year," said Nepute. "In addition, selling, general and administrative expenses for the second quarter of 2007 dropped 13.9%, compared to the first quarter of 2007. This improvement was helped by the timing of our stock-based compensation expense which was more heavily weighted in the first quarter of 2007 and the result of a one-time change in our Franchise for the Future program."

Motorized Recreational Vehicle Segment

Motorized sales of $250.7 million in the second quarter of 2007 increased 11.1% compared to $225.6 million in the second quarter of 2006. As reported by Statistical Surveys, Inc., Monaco Coach Corporation had a 6.3% increase in market share year-to-date through May 2007 for motorhome retail registrations, while industry-wide there was a decline of 7.9% in motorhome registrations for the same period.

Segment gross profit for the second quarter of 2007 was $26.3 million, or 10.5% of sales, compared to $15.9 million, or 7.0% of sales, for the second quarter of 2006. Operating income for the quarter was $6.2 million, or 2.5% of sales, compared to an operating loss of $3.2 million in the second quarter of 2006.

Unit sales of the Motorized RV Segment for the quarter ended June 30, 2007 totaled 1,518, up 7.8% from 1,408 units for the prior year period. Diesel Class A units shipped were 1,096 versus 980, gas Class A units shipped were 239 versus 328, and Class C units shipped were 183 versus 100.

Towable Recreational Vehicle Segment

The Company reported towable sales of $81.0 million for the second quarter of 2007, compared to sales of $89.2 million for the second quarter of 2006. Travel trailer and fifth-wheel registrations for the overall market, according to Statistical Surveys, reported a year-to-date increase of 1.7% through May 2007; the Company reported a 3.5% decline in retail sales for the same period.

Gross margin for the second quarter of 2007 for the towable segment was $8.3 million, or 10.2% of sales, compared to $9.6 million, or 10.8% of sales for the second quarter of 2006. Operating income was $2.4 million, compared to $1.6 million for the second quarter of 2006.

For the second quarter of 2007, towable unit sales, including specialty trailers, were 5,210 units, down from 5,617 units for the same period a year ago.

Motorhome Resorts Segment

Resort sales for the second quarter of 2007 were $3.7 million, down 42.2% from $6.4 million in the second quarter of 2006.

In the second quarter of 2007, the Company sold 6 lots at the Indio resort and 15 lots at the Las Vegas resort. Currently 32 lots are available in Indio and 36 lots are available in Las Vegas. Operating income for the segment was $88,000, down from $2.4 million for the same period last year.

The Company's new resort locations in the Palm Springs, Calif. area and Naples, Fla. area are currently under development, and new lots at these resorts are expected to be available for sale in early 2008.

2007 Business Outlook

"The improvement in the first half of 2007 was primarily due to the Company's progress in improving plant efficiencies and stronger momentum in motorized sales," said Marty Daley, Chief Financial Officer of Monaco Coach Corporation. "Given current run rates and backlog, we are generally optimistic about achieving our previously discussed earnings guidance of approximately $0.37 to $0.41 per share for the year based on sales of approximately $1.3 billion."

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.

Total expected lots in resort are 400, some of which will be available to sell first quarter of 2008.

Naples, FL

Total expected lots in resort are 198, some of which will be available to sell first quarter of 2008.