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Monaco Coach Corp. is using certain processes applied in its recently-acquired R-Vision division as a catalyst to improve its penetration in the towable market nationwide.
Company officials explained in a conference call on Thursday (Feb. 2) that they are changing their business model for their towable plant in Elkhart, Ind., to match the model R-Vision has been using the last several years. The lion’s share of Monaco’s fourth quarter profit came from its R-Vision acquisition in November.
Earlier in the day, Monaco reported its fourth quarter and year-end results. For the year motorized sales were $1 billion, down 17.5% from 2004, while towable sales increased 43.4% to $185.4 million.
For the year, Monaco sold 6,221 motorized units, a decline of 24.1% compared to 8,199 units sold in 2004, and 9,337 towable units, an increase of 102.1% over the 4,621 units sold in 2004.
Monaco reported that towable sales increased 140.9% to $76.7 million for the fourth quarter of 2005 compared to the previous year. The increase reflects the addition of R-Vision sales totaling $15.6 million in just six weeks and $30.2 million in orders from the Federal Emergency Management Agency (FEMA) for emergency housing in the Gulf Coast. Monaco is building the FEMA units at its Elkhart plant and on a motorized line in Wakarusa, Ind.
Manufacturing and material efficiencies improved due to the increased utilization of the plants and higher operating performance of R-Vision, the company said. R-Vision is running at an estimated 65-70% utilization rate, said Kay Toolson, chairman and CEO, while other Monaco plants are running at 50-55%.
Towables have lower gross margins than motorized units, but also have lower selling, general and administrative expenses, the company states. R-Vision builds towables at seven plants in Indiana and gives Monaco its first towable brand name featuring entry-level products. R-Vision plants are smaller than Monaco’s other plants and use a different lamination process.
“R-Vision is a boost to us,”  said Marty Daley, chief financial officer. “Our strategy is to use R-Vision as a catalyst to be where we ought to be on towables.”
Monaco was running at a loss in its towable segment prior to the R-Vision acquisition.
The company will realize approximately $18 million in the first quarter on sales of FEMA units and is prepared to build additional units, but has no plans to continue production into the second quarter. Profit margins improved as Monaco progressed through the production of the FEMA units, and it expects normal margins on those units in the current quarter, Monaco President John Nepute reported.
“It would be somewhat of a drag (on profits) not to have those units going forward. We need to replace that with other products,” Daly said.
Nepute said business conditions remained challenging on the motorized side in the fourth quarter. But by year-end, the company reached an equilibrium of replacing each unit sold at retail with a wholesale shipment without discounting products, he said. The company has held steady with an estimated 17% to 18% of the Class A market. That breaks down to 26% of the diesel market and 10% of the gas-fueled motorhome marketplace, said Nepute.
Consumer response at the early retail shows this year has been “all over the board,” said Nepute, “some good shows, some lousy shows.”
The year started out slowly but business has picked up the last couple of weeks, Nepute added.
The company is having “a tough time with gas models” and bigger success with low- and mid-priced diesel motorhomes, Nepute noted. Monaco introduced two new low-cost diesel units, one under the Monaco brand and one under the Holiday Rambler brand, at this winter’s Louisville Show – a trade venue at which the company wrote a record number of towable orders, according to Toolson.
Monaco expects sales for the first quarter to be $350 million to $360 million. For the full year, it expects sales in the $1.425 billion to $1.475 billion range, including $200 million to $220 million in revenue from R-Vision.