COBURG, Ore., -- Monaco Coach Corporation , one of the nation's leading manufacturers of recreational vehicles, today reported results for the first quarter ended March 29, 2008.
First quarter 2008 revenues were $252.4 million, compared to $322.2 million in revenues for the first quarter of 2007. First quarter 2008 gross profit was $15.8 million, compared to $36.0 million a year ago. Operating loss for the first quarter of 2008 was $12.8 million, compared to operating income of $3.6 million for the first quarter of 2007. Net loss for the first quarter of 2008 was $8.5 million, compared to $1.5 million net income a year ago. For the first quarter of 2008, diluted loss per share was $0.28 versus earnings per share of $0.05 for the same period last year.
"Plummeting consumer confidence, driving consumers to delay their purchases of new RVs, and a difficult consumer lending environment directly impacted Monaco Coach Corporation's first quarter results and sales industry- wide," said Kay Toolson, Chairman and Chief Executive Officer. "In spite of the reduction in demand we experienced during the first quarter, we are pleased to report that our market share was up 8.5% for the first two months of 2008, the same period for which Statistical Surveys, Inc. reported the overall motorhome market was down 20.6%."
"As we have proven during prior market downturns, we feel confident that we can make, and are making, the required changes to return the Company to profitability. In this regard, we have made good progress in several areas in recent quarters. These improvements were overshadowed by the lower-than- expected sales volume that has affected our entire industry during the first quarter and by several expense categories that were higher than expected, including discounts, benefit costs, warranty and settlement," added Toolson.
"We are committed to adjusting our business in order to operate profitably under today's market conditions. This will require changes such as a further reduction in production output, which has been ongoing, as well as reductions in our personnel across the Company. We will also continue to drive down manufacturing costs through purchasing initiatives and projects designed to further improve our manufacturing plant utilization rates. Looking forward we believe that the changes we are making are prudent and necessary, will make our Company stronger and position us to react quickly when the market improves."
"We have always maintained that the RV business is product driven, and we have always worked very hard to be on the leading edge of new product offerings. This year will be no different," Toolson noted. "Our product development pipeline is strong and includes a Class C unit built on the Sprinter chassis, which will be ready for our dealer meeting in June, a Super- C model that will be available in the fall and additional models under development. We remain aggressive in pursuing innovative, fuel-efficient, less expensive new models that will primarily be incremental business. Changes introduced across the 2009 model line-up, we believe, will help us continue market share gains."
Gross profit margin for the Company decreased in the first quarter of 2008 to 6.3% of sales, compared to 11.2% in the first quarter of 2007. John Nepute, President of Monaco Coach Corporation, stated, "The changes we made to our business model in 2007 had us well positioned for a flat or modestly declining 2008 market. However, it now appears likely that the Class A market decline will be more significant than originally anticipated, and Class A retail sales are expected to decline for the fourth straight year."
"When the normal first quarter pick-up in demand did not occur, we responded by reducing our levels of production which influenced our ability to absorb indirect costs. In addition, we also saw higher costs related to product mix, health care costs and warranty expenses during the quarter. Due to the hard work of our operational team, we were successful at managing the direct labor costs at our plants. Notwithstanding the lower volumes, our production lines are running very efficiently, and our model change process is on track."
Nepute concluded, "We were encouraged by the level of units we were able to sell during the quarter, in spite of the market, although the level of discounting was higher than forecasted. Finished goods inventory grew modestly compared to the end of the year. We anticipate the adjustment in our production levels will result in a greater backlog which will help reduce the level of discounting going forward. The Company will also continue to work with our dealer partners to provide targeted retail promotions that will attract customers to their lots and help stimulate both our motorized and towable unit sales."
For the first quarter of 2008, selling, general and administrative expenses were $28.6 million, down 11.5% compared to $32.4 million for the first quarter of 2007. Marty Daley, Chief Financial Officer, stated, "We are pleased that overall selling, general and administrative expenses were down this quarter compared to the first quarter last year. The reduction was the result of a decline in the amount paid out under our franchise program, an elimination of management bonus accrual and declining miscellaneous expenses, partially offset by increases in settlement and personnel costs. We will implement cost savings measures in the second quarter that will generate additional reductions in selling, general and administrative expenses."
Daley continued, "At the end of the quarter, our line of credit balance was $31.6 million and cash balance was $8.1 million. Our balance sheet remains solid and provides the Company with the flexibility to adjust and weather this type of market."
Motorized Recreational Vehicle Segment
Motorized sales in the first quarter of 2008 decreased 20.7% from $245.5 million in the first quarter of 2007 to $194.7 million. The overall mix shifted to lower-priced Class A gas and Class C models, and unit sales for these two classes were up 32.3% and 10.0%, respectively. The segment gross profit for the first quarter of 2008 was $11.8 million, compared to $26.5 million for the first quarter of 2007. The operating loss for the period was $8.6 million.
Unit sales of the Motorized RV Segment for the quarter totaled 1,200, down 17.8% from 1,460 units for the prior year period. Class A diesel units shipped were 773 versus 1,112, while Class A gas units shipped increased to 262 versus 198, and Class C units shipped were 165 versus 150.
Towable Recreational Vehicle Segment
The Company reported towable sales of $55.2 million for the first quarter of 2008, compared to sales of $69.5 million for the first quarter of 2007. Travel trailer and fifth-wheel registrations for the overall market, according to Statistical Surveys, Inc., reported a year-to-date decline of 8.7% through February 2008.
Gross margin for the first quarter of 2008 was $2.7 million, or 5.0% of sales, compared to $4.7 million, or 6.8% of sales for the first quarter of 2007. Lower gross margin was the result of discounting, sales volumes, and higher labor and warranty expenses partially offset by a reduction in material costs. Selling, general and administrative expenses including corporate overhead were $6.2 million, compared to $6.4 million for the first quarter of 2007. Operating loss was $3.5 million for the first quarter of 2008, compared to $1.6 million for the first quarter of last year.
For the first quarter of 2008, towable unit sales were 3,643 units, down from 4,289 units for the same period a year ago.
Motorhome Resorts Segment
Resort sales for the first quarter of 2008 were $2.4 million, down from $7.2 million in the first quarter of 2007. The reduction in lots sales was the result of limited available inventory for sale and lackluster real estate markets. In the first quarter of 2008, the Company sold 11 lots. Currently 51 lots are available for sale in Indio, California and Las Vegas, Nevada. Operating loss for the segment was $747,000.
The Company has purchased additional land in Bay Harbor, Michigan. This resort will consist of approximately 130 lots, which should be available for sale in the third quarter of 2008. The Naples, Florida resort has encountered some project delays and should have lots available for sale late in the third quarter. The La Quinta, California development has also been delayed.
2008 Business Outlook
"Forecasting motorized sales is extremely difficult in this time of economic uncertainty and therefore we expect that the motorized market will continue to be challenging in terms of wholesale demand during the coming months. On the towable side of the business there has been some improvement in our towable orders and it appears we have reached a production level which now matches demand," said Daley. "Given these market drivers, and with the additional cost savings initiatives that we are beginning to implement, we anticipate reducing our loss to between $0.15 and $0.20 per share in the second quarter."
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