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The compound effects of “weak wholesale markets” and heavy discounting to move 2005 product by Monaco Coach Corp. resulted in a net loss of $6 million in the company’s third quarter and the reduction of approximately 225 non-production related jobs.
In its preliminary report, the Coburg, Ore.-based builder noted that in addition to cutting 17% of its administrative work force, it had implemented several “cost saving measures” to keep its inventory in line with the retail environment.
“Financial results are largely driven by demand at the wholesale level, which is affected by the dealer body’s confidence in the economy and the outlook for fuel prices and interest rates,” said John Nepute, president. “We remain concerned about the effects of these items on our business and during this uncertain economic environment we will continue to manage our backlog and work to keep our inventories down. Current production run rates in our motorized division are below our retail sales and should leave the company and our dealer partners in the best possible position entering the new year.”
Monaco reported sales of $297 million during the third quarter, ended Oct. 1, compared with $359 million a year ago. The company noted that the $6 million net loss included a one-time charge of $1.6 million related to the closure of its Royale Coach bus conversion facility and a $1.5 million charge resulting from the relocation of its Beaver Coach operations to Coburg.
In addition, Monaco said the recently launched dealer franchise program affected its quarterly results.
“The company was impacted by changing from our traditional dealer arrangements, which were based upon wholesale activity, to the new ‘Franchise for the Future’ initiative,” said Kay Toolson, chairman and CEO. “The new program, which is based on retail sales, more closely aligns our goals with those of our dealers.
“This transition, while eliminating wholesale discounting on our 2006 products, required greater than expected retail incentives on 2005 model-year units to match the retail focus and acceptance of our new franchise program.”
Marty Daley, vice president and CFO added: “Overlap of our traditional allowance programs and Franchise for the Future resulted in higher than expected promotions to assist retail sales and resulted in selling, general and administrative expenses of approximately 10.5% of sales.”
Monaco, however, said the franchise program had been well received in the dealer network and remained “vital to the long-term success of both our company and our dealer partners.”
The firm also said it continued to gain market share and was working to introduce several new products at the industry trade show in Louisville. “The markets remain fiercely competitive but our lineup of products should continue to attract market share throughout the rest of the year,” said Mike Snell, vice president of sales and marketing.