Monaco Coach Corp.’s continued efforts to adjust inventory levels through discounting sliced into gross profit margins, resulting in a 55% decrease in first quarter earnings compared to 2004.
Net income fell to $5.3 million for the three-month period, ended April 2, versus $11.9 million for the first quarter of 2004 while revenue was off slightly at $331.5 million compared with $355 million last year.
“Discounting during the first quarter allowed us to retain shelf space at our dealers’ lots, but it chipped away at our first quarter gross profit margin,” related Monaco President John Nepute. “We introduced incentives earlier this year to help prevent a build-up of finished goods inventory and to support our dealer partners in retailing their inventory, and we are seeing positive results from these efforts.”
He added, “We do expect to see some level of discounting as we move into the 2006 model year.”
During the quarter, the Coburg, Ore., builder also adjusted production levels by cutting run rates and shuffling its product mix to manufacture more towables. Unit sales for the quarter dropped from 3,136 last year to 3,025 units, including 1,798 motorhomes and 1,227 towables.
In addition, the company closed its Beaver manufacturing plant in Bend., Ore., shifting operations to its Coburg complex and resulting in a one-time charge of approximately $3.5 million to be assessed in the second quarter.
“The market conditions that have been affecting the industry over the past few quarters impacted our financial results in the first quarter,” stated Kay Toolson, chairman and CEO. “Nonetheless, we are very positive about the strong acceptance of our 2005 product line by our dealer network and our retail customers.”