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Monaco Coach Corp. announced today (April 3) that its production plants will not operate next week (April 7-11) and that its production levels will be 20% lower once its factories reopen on April 14.
“The challenges in our market increased throughout the first quarter,” said Kay Toolson, chairman, president and CEO. “Difficult economic conditions and military conflict have pressured consumer confidence, and our retail partners have become very cautious. These circumstances have created an unexpectedly tough sales environment and their duration is hard to predict.”
During the first quarter, which for Monaco ended on Saturday (March 29), Toolson estimates the New York Stock Exchange-listed company earned 15 cents to 20 cents per share, which, based upon 28.9 million shares outstanding, is equivalent to $4.3 million to $5.8 million.
The company’s first-quarter sales revenue will be in the $271 million to $273 million range, he added.
Meanwhile, Toolson said, “The first of our 2004 models made their debut at the recent Family Motor Coach Association (FMCA) Winter Convention in Pomona, Calif., (March 21-23). Public response to these redesigned coaches was encouraging, and retail sales at the show were brisk despite understandable concerns regarding world events.
“However, retail dealers are carefully controlling inventories, and we need to adjust our production levels to more closely reflect demand,” Toolson continued. “Unfortunately, this adjustment will result in corresponding changes to our work force, affecting approximately 850 of our 5,900 employees between our Oregon and Indiana operations. These decisions are difficult but necessary given current market conditions.”
Lower production levels should help Monaco reduce its finished goods inventory and working capital needs, President John Nepute said.
Monaco also will continue retail promotions that are tied to “wholesale incentives in order to encourage dealers to replace products they sell to retail customers,” Nepute said. “Promotional activities pressure gross margins and increase sales expenses, but they are instrumental in working down finished goods and driving inventory turns at the dealer level.”
Although Monaco’s production volume will be lower during the second quarter, CFO Marty Daley believes its second-quarter sales revenue will about equal its first-quarter revenue because selling the company’s finished goods inventory will offset the production decline.
“Our goal is to substantially reduce finished goods inventory and maintain gross margins in the 11.5% to 12.5% range, while effectively controlling our sales and administrative expenses,” Daley said. “If we are successful, we should be able to report second-quarter earnings per share comparable to the first quarter.”