** **

**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

** **

**FORM 10-K/A**

**AmendmentNo. 1**

 

**ý        AnnualReport Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

**Forthe fiscal year ended December 29, 2001**

 

**OR**

** **

**o        TransitionReport Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from               to                   **

 

**Commission File Number:  1-14725**

 

**MONACOCOACH CORPORATION**

(Exact Name ofRegistrant as specified in its charter)

 

| **Delaware**                                                    |   | **35-1880244**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |                                  |
| **91320 Industrial Way**                                        |   |                                  |
| **Coburg, Oregon**                                              |   | **97408**                             |
| (Address of  principal executive offices)                       |   | (Zip code)                            |
|                                                            |   |                                  |
| **(541) 686-8011**                                              |
| (Registrant’s  telephone number, including area code)      |

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| Securities  registered pursuant to Section 12(b) of the Act: |
|--------------------------------------------------------------|
|                                                         |
| **Title of each class:**                                     |   | **Name of each exchange on which registered:** |
| Common Stock,  par value $.01 per share                      |   | New York Stock  Exchange |
| Securities  registered pursuant to Section 12(g) of the Act: |
| None                                                         |

 

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  Indicate by check mark whether the Registrant (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the Registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past ninety days.             YESý  NO o

 

  Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of the Registrant’s knowledge,in definite proxy or information statements incorporated by reference in PartIII of this Form 10-K or any amendment to this Form 10-K o

 

  The aggregate market value of the votingstock held by non-affiliates of the Registrant, based upon the closing saleprice of the Common Stock on March 22, 2002 as reported on the New York StockExchange, was approximately $532 million. Shares of Common Stock held by officers and directors and theiraffiliated entities have been excluded in that such persons may be deemed to beaffiliates.  This determination ofaffiliate status is not necessarily conclusive for other purposes.

 

As of March 22,2002, the Registrant had 28,771,447 shares of Common Stock outstanding.

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DOCUMENTSINCORPORATED BY REFERENCE

The Registrant’sdefinitive Proxy Statement for its Annual Meeting of Stockholders to be held onMay 16, 2002 (the “Proxy Statement”) is incorporated by reference in Part IIIof this Form 10-K to the extent stated therein.

 

This document consists of 54 pages.  The Exhibit Index appears at page 48.

 

 

 

 

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**INDEX**

 

 
| PART I     |
|------------|
|       |   |   |
| ITEM  1.   | BUSINESS |   |   |
|       |   |   |
| PART II    |
|       |   |   |
| ITEM  8.   | FINANCIAL  STATEMENTS AND SUPPLEMENTARY DATA |   |
|       |   |   |
|       |   |   |
| PART IV    |
|       |   |   |
| ITEM 14.   | EXHIBITS, FINANCIAL  STATEMENT SCHEDULES AND REPORTS ON FORM 8-K |   |
|       |   |   |
| SIGNATURES |   |

 

 

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PART I

 

This reportcontains forward-looking statements within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities ExchangeAct of 1934, as amended.  Thesestatements include without limitation those below marked with an asterisk(*).  In addition, the Company may fromtime to time make oral forward-looking statements through statements thatinclude the words “believes”, “expects”, “anticipates” or similar expressions.  Such forward-looking statements involveknown and unknown risks, uncertainties and other factors that may cause actualresults, performance or achievements of the Company to differ materially fromthose expressed or implied by such forward-looking statements, including thoseset forth below under “Factors That May Affect Future Operating Results” withinManagement’s Discussion and Analysis of Financial Condition and Results ofOperations.  The Company cautions thereader, however, that these factors may not be exhaustive.

 

 

**ITEM 1.  BUSINESS**

 

Monaco Coach Corporation(the “Company”) is a leading manufacturer of premium Class A motor coaches,Class C motor coaches and towable recreational vehicles.  The Company’s product line consists ofthirty-two models of motor coaches and seven models of towables (fifth wheeltrailers and travel trailers) under the “Monaco”,  “Holiday Rambler”, “Royale Coach”, “Beaver”, “Safari”, and“McKenzie Towables” brand names.  TheCompany’s products, which are typically priced at the high end of theirrespective product categories, range in suggested retail price from $60,000 to$1.0 million for motor coaches and from $20,000 to $65,000 for towables.  Based upon retail registrations in 2001, theCompany believes it had a 20.5% share of the market for Class A motor coaches,a 13.7% share of the market for mid-to-high end fifth wheel trailers (unitswith retail prices above $25,000) and a 23.9% share of the market formid-to-high end travel trailers (units with retail prices above $20,000).  The Company’s products are sold through anextensive network of 385 dealerships located primarily in the United States andCanada.

 

The Company is thesuccessor to a company formed in 1968 (the “Predecessor”) and commencedoperations on March 5, 1993 by acquiring all the assets and liabilities of itspredecessor company (the “Predecessor Acquisition”).  Prior to March 1996, the Company’s product line consistedexclusively of High-Line Class A motor coaches. In March 1996, the Companyacquired the Holiday Rambler Division of Harley-Davidson, Inc. (“HolidayRambler”), a manufacturer of a full line of Class A motor coaches and towables(the “Holiday Acquisition”). Additionally, on August 2, 2001, the Company acquired SMC Corporation(“SMC”), a manufacturer of a full line of Class A motor coaches (the “SMCAcquisition”).  The Company believesthat developing relationships with a broad base of first-time buyers, coupledwith the Company’s strong emphasis on quality, customer service and designinnovation, will foster brand loyalty and increase the likelihood that, overtime, more customers will trade-up through the Company’s line of products.  Attracting larger numbers of first-timebuyers is important to the Company because of the Company’s belief that manyrecreational vehicle customers purchase multiple recreational vehicles duringtheir lifetime.

 

 

PRODUCTS

 

The Company currentlymanufactures thirty-two motor coach and seven towable models, each of which hasdistinct features and attributes designed to target the model to a particularsuggested retail price range.  TheCompany’s product offerings currently target four product types within therecreational vehicle market: Class A motor coaches, Class C motor coaches,fifth wheel trailers and travel trailers. The Company does not currently compete in any other product categoriesof the recreational vehicle industry. During the  fourth quarter of2001, the Company introduced two new products, the Cayman, a new low pricededition of the Monaco brand diesel motor coach, and the Neptune, a new lowpriced edition of the Holiday Rambler brand diesel motor coach.  These products were designed to fill  retail price points previously without aproduct offering from the Company.

 

 

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  The following table highlights the Company’sproduct offerings as of December 29, 2001:

 

 

| COMPANY MOTOR  COACH PRODUCTS |
|-------------------------------|
|                          |   |   |   |   |
| **MODEL**                     |   | **CURRENT SUGGESTED**

**RETAIL PRICE RANGE** |   | **BRAND** |
| Class A                       |   |   |   |   |
| Royale Coach                  |   | $ 600,000-$1.0  million |   | Monaco |
| Marquis                       |   | $  450,000-$515,000 |   | Beaver |
| Signature Series              |   | $  400,000-$500,000 |   | Monaco |
| Executive                     |   | $  340,000-$400,000 |   | Monaco |
| Navigator                     |   | $  315,000-$395,000 |   | Holiday Rambler |
| Patriot                       |   | $  255,000-$355,000 |   | Beaver |
| Dynasty                       |   | $  250,000-$325,000 |   | Monaco |
| Imperial                      |   | $  230,000-$275,000 |   | Holiday Rambler |
| Contessa                      |   | $ 220,000-$245,000 |   | Beaver |
| Windsor                       |   | $  215,000-$270,000 |   | Monaco |
| Camelot                       |   | $  185,000-$225,000 |   | Monaco |
| Zanzibar                      |   | $  185,000-$220,000 |   | Safari |
| Monterey                      |   | $  185,000-$200,000 |   | Beaver |
| Scepter                       |   | $  180,000-$225,000 |   | Holiday Rambler |
| Sahara                        |   | $  165,000-$185,000 |   | Safari |
| Endeavor-Diesel               |   | $  155,000-$195,000 |   | Holiday Rambler |
| Santiam                       |   | $  155,000-$180,000 |   | Beaver |
| Diplomat                      |   | $  150,000-$195,000 |   | Monaco |
| Cheetah                       |   | $  140,000-$160,000 |   | Safari |
| Knight                        |   | $  120,000-$165,000 |   | Monaco |
| Ambassador                    |   | $  120,000-$165,000 |   | Holiday Rambler |
| Socialite                     |   | $  120,000-$185,000 |   | Monaco |
| Cayman                        |   | $  110,000-$130,000 |   | Monaco |
| Neptune                       |   | $  110,000-$130,000 |   | Holiday Rambler |
| Endeavor-Gasoline             |   | $  105,000-$120,000 |   | Holiday Rambler |
| LaPalma                       |   | $  90,000-$120,000 |   | Monaco |
| Vacationer                    |   | $  90,000-$115,000 |   | Holiday Rambler |
| Trek-Gasoline                 |   | $  85,000-$110,000 |   | Safari |
| Monarch                       |   | $  75,000-$110,000 |   | Monaco |
| Admiral                       |   | $  75,000-$100,000 |   | Holiday Rambler |
|                          |   |   |   |   |
| Class C                       |   |   |   |   |
| Atlantis                      |   | $ 60,000-$75,000 |   | Holiday Rambler |
| Rogue                         |   | $ 60,000-$70,000 |   | Monaco |

 

| COMPANY TOWABLE  PRODUCTS    |
|------------------------------|
|                         |   |   |   |   |
| **MODEL**                    |   | **CURRENT SUGGESTED**

**RETAIL PRICE RANGE** |   | **BRAND** |
| Medallion Fifth Wheel        |   | $ 40,000-$65,000 |   | McKenzie |
| Presidential Fifth  Wheel    |   | $ 40,000-$45,000 |   | Holiday Rambler |
| Presidential  Travel Trailer |   | $ 40,000-$45,000 |   | Holiday Rambler |
| Lakota Fifth  Wheel          |   | $ 30,000-$50,000 |   | McKenzie |
| Alumascape Fifth Wheel       |   | $ 30,000-$35,000 |   | Holiday Rambler |
| Alumascape Travel  Trailer   |   | $ 20,000-$30,000 |   | Holiday Rambler |
| Lakota Travel  Trailer       |   | $ 20,000-$30,000 |   | McKenzie |

 

 

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In 2001, the average unitwholesale selling prices of the Company’s motor coaches, fifth wheel trailersand travel trailers were approximately $137,500, $30,100 and $23,000,respectively.  The Company’s motor coachproducts generated 90.3%, 89.6% and 88.8% of total revenues for the fiscalyears 2001, 2000 and 1999, respectively.

 

The Company’srecreational vehicles are designed to offer all the comforts of home within a215 to 415 square foot area. Accordingly, the interior of the recreational vehicle is designed tomaximize use of available space.  TheCompany’s products are designed with five general areas, all of which aresmoothly integrated to form comfortable and practical mobile accommodations.  The five areas are the living room, kitchen,dining room, bathroom and bedroom.  Foreach model, the Company offers a variety of interior layouts.

 

Each of the Company’srecreational vehicles comes fully equipped with a wide range of kitchen andbathroom appliances, audio and visual electronics, communication devices, andother amenities, including couches, dining tables, closets and storagespaces.  All of the Company’srecreational vehicles incorporate products from well-recognized suppliers,including: stereos, CD and cassette players, VCR’s, DVD’s and televisions fromQuasar, Bose, Panasonic and Sony; microwave ovens from Sharp, Magic Chef, andGeneral Electric; stoves and ranges from KitchenAid and Modern Maid; enginesfrom Cummins and Caterpillar; transmissions from Allison; and chassis from Fordand Workhorse.  The Company’s high endproducts offer top-of-the-line amenities, including 25” Sony stereotelevisions, GPS systems from Carin, fully automatic DSS (satellite) systems,Corian and Wilsonart solid surface kitchen and bath countertops, importedceramic tile and leather furniture, and Ralph Lauren and Martha Stewartfabrics.

 

 

PRODUCT DESIGN

 

To address changingconsumer preferences, the Company modifies and improves its products each modelyear and typically redesigns each model every three or four years.  The Company’s designers work with theCompany’s marketing, manufacturing and service departments to design a productthat is appealing to consumers, practical to manufacture and easy toservice.  The designers try to maximizethe quality and value of each model at the strategic retail price point forthat model.  The marketing and salesstaff suggest features or characteristics that they believe could be integratedinto the various models to differentiate the Company’s products from those ofits competitors.  By working withmanufacturing personnel, the Company’s product designers engineer therecreational vehicles so that they can be built efficiently and with highquality.  Service personnel suggestideas to improve the serviceability and reliability of the Company’s productsand give the designers feedback on the Company’s past designs.

 

The exteriors of theCompany’s recreational vehicles are designed to be aesthetically appealing toconsumers, aerodynamic in shape for fuel efficiency and practical tomanufacture.  The Company has anexperienced team of computer-aided design personnel to complete the productdesign and produce prints from which the products will be manufactured.

 

The Company expensed $6.2million, $5.1 million and $4.7 million for research and development in thefiscal years 2001, 2000 and 1999, respectively.

 

 

SALES ANDMARKETING

 

DEALERS

 

The Company expanded itsdealer network over the past year from 294 dealerships at the beginning of 2001to 385 dealerships primarily located in the United States and Canada atDecember 29, 2001.  Revenue generatedfrom shipments to dealerships located outside the United States wereapproximately 3.1%, 4.3% and 4.0% of total sales for the fiscal years 2001,2000 and 1999, respectively.  TheCompany intends to continue to expand its dealer network, primarily by addingadditional motorized dealers to carry the Company’s new lower priced gas anddiesel

 

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units as well asSafari and Beaver dealers to increase unit sales for these two brands.*  The Company maintains an internal salesorganization consisting of 36 account executives who service the Company’sdealer network.

 

The Company analyzes andselects new dealers on the basis of such criteria as location, marketing ability,sales history, financial strength and the capability of the dealer’s repairservices.  The Company provides itsdealers with a wide variety of support services, including advertisingsubsidies and technical training, and offers certain model pricing discounts todealers who exceed wholesale purchase volume milestones.  The Company’s sales staff is also availableto educate dealers about the characteristics and advantages of the Company’srecreational vehicles compared with competing products.  The Company offers dealers geographicexclusivity to carry a particular model. While the Company’s dealership contracts have renewable one or two-yearterms, historically the Company’s dealer turnover rate has been low.

 

Dealers typically financetheir inventory through revolving credit facilities established withasset-based lending institutions, including specialized finance companies andbanks.  It is industry practice thatsuch “floor plan” lenders require recreational vehicle manufacturers to agreeto repurchase (for a period of 12 to 18 months from the date of the dealer’spurchase) motor coaches and towables previously sold to the dealer in the eventthe dealer defaults on its financing agreements.  The Company’s contingent obligations under these repurchaseagreements are reduced by the proceeds received upon the sale of anyrepurchased units. See “Management’s Discussion and Analysis of FinancialConditions and Results of Operations — Liquidity and Capital Resources”, andNote 16 of Notes to the Company’s Consolidated Financial Statements.

 

 

 

ADVERTISING ANDPROMOTION

 

The Company advertisesregularly in trade journals and magazines, participates in cooperativeadvertising programs with its dealers, and produces color brochures depictingits models’ performance features and amenities.  The Company also promotes its products with direct incentiveprograms to dealer sales personnel linked to sales of particular models.

 

A critical marketingactivity for the Company is its participation in the more than 155 recreationalvehicle trade shows and rallies each year. National trade shows and rallies, which can attract as many as 40,000attendees, are an integral part of the Company’s marketing process because theyenable dealers and potential retail customers to compare and contrast all theproducts offered by the major recreational vehicle manufacturers.  Setting up attractive display areas at majortrade shows to highlight the newest design innovations and product features ofits products is critical to the Company’s success in attracting and maintainingits dealer network and in generating enthusiasm at the retail customerlevel.  The Company also providescomplimentary service for minor repairs to its customers at several rallies andtrade shows.

 

The Company attempts toencourage and reinforce customer loyalty through clubs for the owners of itsproducts so that they may share experiences and communicate with eachother.  The Company’s clubs currentlyhave more than 30,000 members.  TheCompany publishes magazines to enhance its relations with these clubs and holdsrallies for clubs to meet periodically to view the Company’s new models andobtain maintenance and service guidance. Attendance at Company-sponsored rallies can be as high as 2,100recreational vehicles per year.  TheCompany frequently receives support from its dealers and suppliers to hostthese rallies.

 

The Company’s web sitealso offers an extensive listing of the Company’s models, floor plans, andfeatures, including “virtual tours” of some models.  A dealer locator feature identifies for customers the closestdealers to their location for the model(s) they are interested inpurchasing.  The Company’s web site alsoprovides information for upcoming rallies and club functions as well as linksto other R.V. Lifestyle web sites of interest to existing or potentialcustomers.

 

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CUSTOMER SERVICE

 

The Company believes thatcustomer satisfaction is vitally important in the recreational vehicle marketbecause of the large number of repeat customers and the rapid communication ofbusiness reputations among recreational vehicle enthusiasts.  The Company also believes that service is anintegral part of the total product the Company delivers and that responsive andprofessional customer service is consistent with the premium image the Companystrives to convey in the marketplace.

 

The Company offers awarranty to all purchasers of its new vehicles.  The Company’s current warranty covers its products for up to oneyear (or 24,000 miles, whichever occurs first) from the date of retail sale(five years for the front and sidewall frame structure, and three years for theMagnum chassis).  In addition, customersare protected by the warranties of major component suppliers such as those ofCummins Engine Company, Inc. (“Cummins”) (diesel engines), Caterpillar Inc.(“Caterpillar”) (diesel engines), Spicer Heavy Axle & Brake Division ofDana Corporation (“Dana”) (axles), Allison Transmission Division of GeneralMotors Corporation (“Allison”) (transmissions), Workhorse (chassis), and FordMotor Company (“Ford”).  The Company’swarranty covers all manufacturing-related problems and parts and systemfailures, regardless of whether the repair is made at a Company facility or byone of the Company’s dealers or authorized service centers.  As of December 29, 2001, the Company had 385dealerships providing service to owners of the Company’s products.  In addition, owners of the Company’s dieselproducts have access to the entire Cummins dealer network, which includes over2,000 repair centers.

 

The Company operatesservice centers in Harrisburg, Oregon, Bend, Oregon, Elkhart, Indiana,Leesburg, Florida, and Tampa, Florida. The Company had approximately 656 employees in customer service atDecember 29, 2001.  The Companymaintains individualized production records and a computerized warrantytracking system which enable the Company’s service personnel to identifyproblems quickly and to provide individualized customer service.  While many problems can be resolved on thetelephone, the customer may be referred to a nearby dealer or servicecenter.  The Company believes thatdedicated customer service phone lines are an ideal way to interact directlywith the Company’s customers and to quickly address their technical problems.

 

   The Company  has expandedits on-line dealer support network to assist its service personnel and dealersin providing better service to the Company’s customers.  Service personnel and dealerships are ableto access information relating to specific models and sales orders, filewarranty claims and track their status, and view the status of existing partsorders.  The Company’s on-line dealersupport network gives  service personnelat dealerships the ability to order parts through an electronic parts catalog.

 

 

MANUFACTURING

 

The Company currentlyoperates motorized manufacturing facilities in Coburg, Oregon, Bend, Oregon,and in Wakarusa, Indiana.  The Company’stowable manufacturing facilities are in Elkhart, Indiana.  The Company also operates its Royale Coachbus conversion facility in Elkhart, Indiana.

 

The Company’s motor coachproduction capacity at the end of 2001 was 25 units per day at its Coburgfacility, 3 units per day at its Bend Facility,  and 25 units per day at its Wakarusa facility.  The Company believes that this manufacturingcapacity will position the Company to take advantage of future growth potentialof the Company’s products within the RV market.*  The Company’s current towables production capacity is  25 units per day at its  Elkhart facility.

 

The Company believes thatits manufacturing process is one of the most vertically integrated in therecreational vehicle industry.  Bymanufacturing a variety of items, including the Roadmaster semi-monocoquediesel chassis, plastic components, some of its cabinetry and fiberglass parts,as well as many subcomponents, the Company maintains increased control overscheduling, component production and overall product quality.  In addition, vertical integration enablesthe Company to be more responsive to market dynamics.

 

Each facility has severalstations for manufacturing, organized into four broad categories: chassismanufacturing, body manufacturing, painting and finishing.  It takes from two weeks to two months tobuild each

 

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unit, depending onthe product.  The Company keeps adetailed log book during the manufacture of each product and inputs keyinformation into its computerized service tracking system.

 

Each unit is given aninspection during which its appliances and plumbing systems are thoroughlytested.  As a final quality controlcheck, each motor coach is given a road test. To further ensure both dealer and end-user satisfaction, the Company paysa unit fee per recreational vehicle to its dealers so that they will thoroughlyinspect each product upon delivery and return a detailed report form.

 

The Company purchases rawmaterials, parts, subcomponents, electronic systems, and appliances from approximately1,000 vendors.  These items are eitherdirectly mounted in the vehicle or are utilized in subassemblies which theCompany assembles before installation in the vehicle.  The Company attempts to minimize its level of inventory byordering most parts as it needs them. Certain key components that require longer purchasing lead times areordered based on planned needs. Examples of these components are diesel engines, axles, transmissions,chassis and interior designer fabrics. The Company has a variety of major suppliers, including Allison,Workhorse, Cummins, Caterpillar, Dana and Ford.   The Company does not have any long-term supply contracts withthese suppliers or their distributors, but believes it has good relationshipswith them.  To minimize the risksassociated with reliance on a single-source supplier, the Company typicallykeeps a 60-day supply of axles, engines, chassis and transmissions in stock oravailable at the suppliers’ facilities and believes that, in an emergency,other suppliers could fill the Company’s needs on an interim basis.*  The Company presently believes that itsallocation by suppliers of all components is sufficient to meet plannedproduction volumes, and the Company does not foresee any operating difficultiesas a result of vendor supply issues.* Nevertheless, there can be no assurance that Allison, Ford, or any ofthe Company’s other suppliers will be able to meet the Company’s futurerequirements for transmissions, chassis, or other key components.  An extended delay or interruption in thesupply of any components obtained from a single or limited source suppliercould have a material adverse effect on the Company’s business, results ofoperations and financial condition.

 

 

BACKLOG

 

The Company’s productsare generally manufactured against orders from the Company’s dealers. As ofDecember 29, 2001, the Company’s backlog of orders was $202.0 million, comparedto $80.6 million at December 30, 2000. The Company includes in its backlog all accepted purchase orders from dealersshippable within the next six months. Orders in backlog can be canceled at the option of the purchaser at anytime without penalty and, therefore, backlog should not be used as a measure offuture sales.  The Company expects tofill all backlog orders.*

 

 

COMPETITION

 

The market forrecreational vehicles is highly competitive. The Company currently encounters significant competition at each pricepoint for its recreational vehicle products. The Company believes that the principal competitive factors that affectthe market for the Company’s products include product quality, productfeatures, reliability, performance, quality of support and customer service,loyalty of customers, brand recognition and price.  The Company believes that it competes favorably against itscompetitors with respect to each of these factors.  The Company’s competitors include, among others: CoachmenIndustries, Inc., Fleetwood Enterprises, Inc., National R.V. Holdings, Inc.,Skyline Corporation, Thor Industries, Inc. and Winnebago Industries, Inc.  Many of the Company’s competitors havesignificant financial resources and extensive marketing capabilities.  There can be no assurance that either existingor new competitors will not develop products that are superior to or thatachieve better consumer acceptance than the Company’s products, or that theCompany will continue to remain competitive.

 

 

GOVERNMENTREGULATION

 

The manufacture andoperation of recreational vehicles are subject to a variety of federal, stateand local regulations, including the National Traffic and Motor Vehicle SafetyAct and safety standards for recreational vehicles and their components thathave been promulgated by the Department of Transportation.  These standards permit the National HighwayTraffic Safety Administration to require a manufacturer to repair or recallvehicles with

 

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safety defects orvehicles that fail to conform to applicable safety standards. Because of itssales in Canada, the Company is also governed by similar laws and regulationspromulgated by the Canadian government. The Company has on occasion voluntarily recalled certain products.  The Company’s operating results could beadversely affected by a major product recall or if warranty claims in anyperiod exceed warranty reserves.

 

The Company is a memberof the Recreation Vehicle Industry Association (the “RVIA”), a voluntaryassociation of recreational vehicle manufacturers and suppliers, whichpromulgates recreational vehicle safety standards.  Each of the products manufactured by the Company has an RVIA sealaffixed to it to certify that such standards have been met.

 

Many states regulate thesale, transportation and marketing of recreational vehicles.  The Company is also subject to stateconsumer protection laws and regulations, which in many cases requiremanufacturers to repurchase or replace chronically malfunctioning recreationalvehicles. Some states also legislate additional safety and constructionstandards for recreational vehicles.

 

The Company is subject toregulations promulgated by the Occupational Safety and Health Administration(“OSHA”). The Company’s plants are periodically inspected by federal or stateagencies, such as OSHA, concerned with workplace health and safety.

 

The Company believes thatits products and facilities comply in all material respects with the applicablevehicle safety, consumer protection, RVIA and OSHA regulations andstandards.*  Amendments to any of theforegoing regulations and the implementation of new regulations couldsignificantly increase the cost of manufacturing, purchasing, operating orselling the Company’s products and could materially and adversely affect theCompany’s net sales and operating results. The failure of the Company to comply with present or future regulationscould result in fines being imposed on the Company, potential civil andcriminal liability, suspension of production or cessation of operations.

 

The Company is subject toproduct liability and warranty claims arising in the ordinary course ofbusiness.  To date, the Company has beensuccessful in obtaining product liability insurance on terms the Companyconsiders acceptable.  The Company’scurrent policies jointly provide coverage against claims based on occurrenceswithin the policy periods up to a maximum of $100.1 million for each occurrenceand $102.0 million in the aggregate. There can be no assurance that the Company will be able to obtaininsurance coverage in the future at acceptable levels or that the costs ofinsurance will be reasonable. Furthermore, successful assertion against the Company of one or a seriesof large uninsured claims, or of one or a series of claims exceeding anyinsurance coverage, could have a material adverse effect on the Company’sbusiness, operating results and financial condition.

 

Certain U.S. tax lawscurrently afford favorable tax treatment for the purchase and sale ofrecreational vehicles.  These laws andregulations have historically been amended frequently, and it is likely thatfurther amendments and additional laws and regulations will be applicable tothe Company and its products in the future. Furthermore, no assurance can be given that any increase in personalincome tax rates will not have a material adverse effect on the Company’sbusiness, operating results and financial condition by reducing demand for theCompany’s products.

 

ENVIRONMENTALREGULATION AND REMEDIATION

 

REGULATION  The Company’s recreational vehiclemanufacturing operations are subject to a variety of federal and stateenvironmental regulations relating to the use, generation, storage, treatmentand disposal of hazardous materials. These laws are often revised and made more stringent, and it is likelythat future amendments to these laws will impact the Company’s operations.

 

The Company hassubmitted applications for “Title V” air permits for all of its existing andnew operations.  The air permits haveeither been issued or are in the process of being issued by the relevant stateagency.

 

The Company doesnot currently anticipate that any additional air pollution control equipmentwill be required as a condition of receiving new air permits, although newregulations and their interpretation may change over time, and there can be noassurance that additional expenditures will not be required.*

 

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The Company is aware ofthe forthcoming adoption and implementation of new federal Maximum AchievableControl Technology (“MACT”) regulations. The Company does not currently anticipate that compliance with the MACTregulations by the Company will require any material capital expenditures atits facilities beyond those which have already been incurred.*  However, the specific content andinterpretation of these regulations is uncertain and there can be no assurancethat additional capital expenditures will not be required.

 

While the Companyhas in the past provided notice to the relevant state agencies that air permitviolations have occurred at its facilities, the Company has resolved all suchissues with those agencies, and the Company believes that there are no ongoingviolations of any of its existing air permits at any of its owned or leasedfacilities at this time.*  However, thefailure of the Company to comply with present or future regulations couldsubject the Company to: (i) fines; (ii) potential civil and criminal liability;(iii) suspension of production or cessation of operations; (iv) alterations tothe manufacturing process; or (v) costly cleanup or capital expenditures, anyof which could have a material adverse effect on the Company’s business,results of operations and financial condition.

 

REMEDIATION  The Company is not currently involved inremediation activities at any of its facilities and none are in prospect.  Nevertheless, there can be no assurance thatthe Company will not discover environmental problems or incur remediation costsin the future.

 

 

EMPLOYEES

 

As of December 29, 2001,the Company had 4,822 employees, including 3,617 in production, 96 in sales,656 in service and 453 in management and administration.  The Company’s employees are not representedby any collective bargaining organization, and the Company has neverexperienced a work stoppage resulting from labor issues.  The Company believes its relations with itsemployees are good.

 

 

DEPENDENCE ON KEYPERSONNEL

 

The Company’s futureprospects depend upon its key management personnel, including Kay L. Toolson,the Company’s Chief Executive Officer and John W. Nepute, the Company’sPresident.  The loss of one or more ofthese key management personnel could adversely affect the Company’sbusiness.  The prospects of the Companyalso depend in part on its ability to attract and retain qualified technical,manufacturing, managerial and marketing personnel.  Competition for such personnel is intense, and there can be noassurance that the Company will be successful in attracting and retaining suchpersonnel.

 

 

EXECUTIVE OFFICERSOF THE COMPANY

 

The following sets forthcertain information with respect to the executive officers of the Company as ofMarch 22, 2002:

 

| **Name**            |   | **Age** |   | **Position with the Company**                                      |
|---------------------|--------|---------|--------|--------------------------------------------------------------------|
| Kay L. Toolson      |   | 58      |   | Chairman and  Chief Executive Officer                              |
| John W. Nepute      |   | 50      |   | President                                                          |
| Richard E. Bond     |   | 48      |   | Senior Vice  President, Secretary and Chief Administrative Officer |
| Martin W.  Garriott |   | 46      |   | Vice President  and Director of Oregon Manufacturing               |
| Irvin M. Yoder      |   | 54      |   | Vice President  and Director of Indiana Manufacturing              |
| Patrick F.  Carroll |   | 44      |   | Vice President  of Product Development                             |
| P. Martin Daley     |   | 37      |   | Vice President  and Chief Financial Officer                        |
| Michael P. Snell    |   | 33      |   | Vice President  of Sales                                           |
| John B. Healey  Jr. |   | 36      |   | Vice President  of Corporate Purchasing                            |

 

10

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Mr. Toolson has served asChief Executive Officer of the Company and the Predecessor since 1986 and asChairman of the Company since July 1993. He served as President of the Company from 1986 to October 2000, exceptfor the periods from October 1995 to January 1997 and August 1998 to September1999.  From 1973 to 1986, Mr. Toolsonheld executive positions with two motor coach manufacturers.

 

Mr. Nepute has served theCompany as President since October 2000. He served as Executive Vice President, Treasurer and Chief Financial Officerfrom September 1999 to October 2000. Prior to that and from 1991, he served the Company and the Predecessorin the capacity of Vice President of Finance, Treasurer and Chief FinancialOfficer.  From January 1988 untilJanuary 1991, he served the Predecessor as Controller.

 

Mr. Bond has served asSenior Vice President, Secretary and Chief Administrative Officer of theCompany since September 1999 and as Vice President, Secretary and ChiefAdministrative Officer beginning in August of 1998.  Prior to that and from February 1997, he served the Company asVice President, Secretary and General Counsel, having joined the Company inJanuary 1997.  From 1987 to December1996, he held the position of Vice President, Secretary and General Counsel ofHoliday Rambler, and originally joined Holiday Rambler as Vice President andAssistant General Counsel in 1984.

 

Mr. Garriott has servedthe Company as Vice President and Director of Oregon Manufacturing sinceJanuary 1997.  He has been continuouslyemployed by the Company or the Predecessor since November 1975 in variouscapacities, including Vice President of Corporate Purchasing from October 1994until December 1996.

 

Mr. Yoder has served theCompany as Vice President and Director of Indiana Manufacturing since August1998.  Joining the Company upon theacquisition of Holiday Rambler in March 1996 as Director of Indiana MotorizedManufacturing, he served in that capacity through July 1998.  Mr. Yoder began his employment with HolidayRambler in 1969 and held a variety of production-related positions, serving asArea Manager of Motorized Production from 1980 until March 1996.

 

Mr. Carroll has served asVice President of Product Development since August 1998 and prior to that asDirector of Product Development since joining the Company in October 1995.  He has held a variety of marketing andproduct development positions with various recreational vehicle manufacturerssince 1979.

 

Mr. Daley has served asVice President and Chief Financial Officer since October 2000.  He served as Corporate Controller from March1996 to October 2000.  Prior to that, heserved as the Oregon Controller since joining the Company in November 1994.

 

Mr. Snell has served asVice President of Sales since October of 2000, and as Vice President of MonacoMotorized Sales beginning in August 1998. Prior to that and since joining the Company in October of 1994,  he held different positions in the salesdepartment, including National Sales Manager of Monaco Motorized Sales.

 

Mr. Healey has served as VicePresident of Corporate Purchasing since October of 2000 and as Director ofPurchasing for Indiana Operations beginning in August of 1998.  Prior to that and since joining the Companyin March of 1991, he held a variety of positions in the purchasing department.

 

11

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**ITEM8.  FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

 

 
| INDEX TO  FINANCIAL STATEMENTS                                    |
|-------------------------------------------------------------------|
|                                                              |   |   |   |
|                                                              |   |   |   |
| Monaco Coach  Corporation—Consolidated Financial Statements: |   |   |
|                                                              | Report of Independent  Accountants |   |   |
|                                                              | Consolidated  Balance Sheets as of December 30, 2000 and December 29, 2001 |   |   |
|                                                              | Consolidated  Statements of Income for the Fiscal Years Ended January 1, 2000,  December 30, 2000 and December 29, 2001 |   |   |
|                                                              |   |   |
|                                                              | Consolidated Statements of  Stockholders’ Equity for the Fiscal Years Ended  January 1, 2000,  December 30, 2000  and December 29, 2001 |   |   |
|                                                              |   |   |
|                                                              | Consolidated  Statements of Cash Flows for the Fiscal Years Ended January 1, 2000,  December 30, 2000 and December 29, 2001 |   |   |
|                                                              |   |   |
|                                                              | Notes  to Consolidated Financial Statements |   |   |
|                                                              |   |   |   |
| Schedule  Included in Item 14(a):                                 |   |   |
|                                                              | II Valuation and  Qualifying Accounts |   |   |
|                                                                   |  |  |  |  |

 

12

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# **Reportof Independent Accountants**

 

 

 

 

To the Stockholdersand Board of Directors of Monaco Coach Corporation:

 

In our opinion, the accompanying consolidated balancesheets and the related consolidated statements of income, of stockholders’equity, and of cash flows listed in the accompanying index present fairly, inall material respects, the financial position of Monaco Coach Corporation andSubsidiaries (the Company) at December 30, 2000 and December 29, 2001, and theresults of their operations and their cash flows for each of the three years inthe period ended December 29, 2001, in conformity with accounting principlesgenerally accepted in the United States of America. In addition, in ouropinion, the financial statement schedule listed in the accompanying indexpresents fairly, in all material respects, the information set forth thereinwhen read in conjunction with the related consolidated financial statements.These financial statements and the financial statement schedule are theresponsibility of the Company’s management; our responsibility is to express anopinion on these financial statements based on our audits. We conducted ouraudits of these financial statements in accordance with auditing standardsgenerally accepted in the United States of America, which require that we planand perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

 

 

/s/PricewaterhouseCoopers LLP

 

 

Portland, Oregon

January 26, 2002 

 

13

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**MONACOCOACH CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

*(inthousands of dollars, except share and per share data)*

 

 

 
|                                                                                                                         |   | **December  30, 2000** |    | **December  29, 2001** |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|------------------------|--------|
| **ASSETS**                                                                                                                   |   |                   |    |                   |   |
| Current assets:                                                                                                              |   |                   |    |                   |   |
| Trade  receivables, net of $164 and $541, respectively                                                                       |   | $                      | 67,998  |                   | $      | 82,885 |   |
| Inventories                                                                                                                  |   | 114,397                |    | 127,075                |   |
| Prepaid  expenses                                                                                                            |   | 1,046                  |    | 2,063                  |   |
| Deferred income  taxes                                                                                                       |   | 13,197                 |    | 27,327                 |   |
| Total  current assets                                                                                                        |   | 196,638                |    | 239,350                |   |
|                                                                                                                         |   |                   |    |                   |   |
| Notes  receivable                                                                                                            |   | 2,800                  |    | 8,157                  |   |
| Property,  plant and equipment, net                                                                                          |   | 103,590                |    | 122,795                |   |
| Debt  issuance costs, net of accumulated amortization of $75                                                                 |   |                   |    | 940                    |   |
| Goodwill,  net of accumulated amortization of $4,675 and $5,320, respectively                                                |   | 18,582                 |    | 55,856                 |   |
|                                                                                                                         |   |                   |    |                   |   |
| Total assets                                                                                                                 |   | $                      | 321,610 |                   | $      | 427,098 |   |
|                                                                                                                         |   |                   |    |                   |   |
| **LIABILITIES**                                                                                                              |   |                   |    |                   |   |
| Current liabilities:                                                                                                         |   |                   |    |                   |   |
| Book  overdraft                                                                                                              |   | $                      | 15,178  |                   | $      | 5,889 |   |
| Line  of credit                                                                                                              |   | 20,585                 |    | 26,004                 |   |
| Current  portion of long-term note payable                                                                                   |   |                   |    | 10,000                 |   |
| Accounts  payable                                                                                                            |   | 53,098                 |    | 66,859                 |   |
| Accrued expenses  and other liabilities                                                                                      |   | 38,478                 |    | 66,904                 |   |
| Total  current liabilities                                                                                                   |   | 127,339                |    | 175,656                |   |
|                                                                                                                         |   |                   |    |                   |   |
| Long-term  note payable                                                                                                      |   |                   |    | 30,000                 |   |
| Deferred income  taxes                                                                                                       |   | 7,646                  |    | 8,312                  |   |
|                                                                                                                         |   | 134,985                |    | 213,968                |   |
|                                                                                                                         |   |                   |    |                   |   |
| Commitments and contingencies (Note 16)                                                                                      |   |                   |    |                   |   |
|                                                                                                                         |   |                   |    |                   |   |
| **STOCKHOLDERS’  EQUITY**                                                                                               |   |                   |    |                   |   |
| Common  stock, $.01 par value; 50,000,000 shares authorized, 18,952,107 and  28,632,774 issued and outstanding, respectively |   | 190                    |    | 286                    |   |
| Additional  paid-in capital                                                                                                  |   | 47,032                 |    | 48,522                 |   |
| Retained  earnings                                                                                                           |   | 139,403                |    | 164,322                |   |
| Total  stockholders’ equity                                                                                             |   | 186,625                |    | 213,130                |   |
| Total liabilities and  stockholders’ equity                                                                             |   | $                      | 321,610 |                   | $      | 427,098 |   |
|                                                                                                                         |   |                   |    |                   |   |
| The accompanying notes  are an integral part of these consolidated financial statements.                                |

 

14

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**MONACOCOACH CORPORATION**

** CONSOLIDATED STATEMENTS OF INCOME**

**for the years ended January 1, 2000, December 30, 2000 andDecember 29, 2001**

*(inthousands of dollars, except share and per share data)*

 

 
|                                                                                           |   | **1999**   |    | **2000**   |   | **2001**   |   |
|------------------------------------------------------------------------------------------------|--------|------------|---------|------------|--------|------------|--------|
|                                                                                           |   |       |    |       |   |       |   |
| Net  sales                                                                                     |   | $          | 780,815 |       | $      | 901,890    |   | $ | 937,073 |   |
| Cost of sales                                                                                  |   | 658,536    |    | 772,240    |   | 823,083    |   |
| Gross  profit                                                                                  |   | 122,279    |    | 129,650    |   | 113,990    |   |
|                                                                                           |   |       |    |       |   |       |   |
| Selling,  general and administrative expenses                                                  |   | 48,791     |    | 59,175     |   | 70,687     |   |
| Amortization of  goodwill                                                                      |   | 645        |    | 645        |   | 645        |   |
| Operating  income                                                                              |   | 72,843     |    | 69,830     |   | 42,658     |   |
|                                                                                           |   |       |    |       |   |       |   |
| Other  income, net                                                                             |   | 142        |    | 182        |   | 334        |   |
| Interest expense                                                                               |   | (1,143     | )       | (632       | )      | (2,357     | )      |
| Income  before income taxes                                                                    |   | 71,842     |    | 69,380     |   | 40,635     |   |
|                                                                                           |   |       |    |       |   |       |   |
| Provision for  income taxes                                                                    |   | 28,081     |    | 26,859     |   | 15,716     |   |
|                                                                                           |   |       |    |       |   |       |   |
| Net income                                                                                     |   | $          | 43,761  |       | $      | 42,521     |   | $ | 24,919 |   |
|                                                                                           |   |       |    |       |   |       |   |
| Earnings per common share:                                                                     |   |       |    |       |   |       |   |
| Basic                                                                                          |   | $          | 1.55    |       | $      | 1.50       |   | $ | .87 |   |
| Diluted                                                                                        |   | $          | 1.51    |       | $      | 1.47       |   | $ | .85 |   |
|                                                                                           |   |       |    |       |   |       |   |
| Weighted average common shares outstanding:                                                    |   |       |    |       |   |       |   |
| Basic                                                                                          |   | 28,213,445 |    | 28,377,123 |   | 28,531,593 |   |
| Diluted                                                                                        |   | 29,050,454 |    | 28,978,265 |   | 29,288,688 |   |
|                                                                                           |   |       |    |       |   |       |   |
| The accompanying notes  are an integral part of these consolidated financial statements.  |

 

15

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**MONACOCOACH CORPORATION**

** CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**

**for the years ended January 1, 2000,December 30, 2000  and December 29, 2001**

*(in thousands of dollars, exceptshare data)*

 
|                                                                                           |   | **Common  Stock** |   | **Additional  Paid-in**

**Capital** |   | **Retained**

**Earnings** |   | **Total** |   |
|------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------------------------------------|--------|----------------------------|--------|-----------|--------|
|                                                                                           |   | **Shares**        |   | **Amount**                           |   |                       |   |      |
|                                                                                           |   |              |   |                                 |   |                       |   |      |   |   |   |
| Balances,  January 2, 1999                                                                     |   | 12,481,095        |   | $                                    | 125    |                       | $      | 44,947    |   | $ | 53,121 |   | $ | 98,193 |   |
| Issuance  of common stock                                                                      |   | 116,311           |   | 1                                    |   | 956                        |   |      |   | 957 |   |
| Tax  benefit of stock options exercised                                                        |   |              |   |                                 |   | 428                        |   |      |   | 428 |   |
| Stock  splits                                                                                  |   | 6,273,678         |   | 63                                   |   | (63                        | )      |      |   | 0 |   |
| Net income                                                                                     |   |              |   |                                 |   |                       |   | 43,761    |   | 43,761 |   |
| Balances,  January 1, 2000                                                                     |   | 18,871,084        |   | 189                                  |   | 46,268                     |   | 96,882    |   | 143,339 |   |
| Issuance  of common stock                                                                      |   | 81,023            |   | 1                                    |   | 727                        |   |      |   | 728 |   |
| Tax  benefit of stock options exercised                                                        |   |              |   |                                 |   | 37                         |   |      |   | 37 |   |
| Net income                                                                                     |   |              |   |                                 |   |                       |   | 42,521    |   | 42,521 |   |
| Balances,  December 30, 2000                                                                   |   | 18,952,107        |   | 190                                  |   | 47,032                     |   | 139,403   |   | 186,625 |   |
| Issuance  of common stock                                                                      |   | 161,848           |   | 1                                    |   | 1,115                      |   |      |   | 1,116 |   |
| Tax  benefit of stock options exercised                                                        |   |              |   |                                 |   | 470                        |   |      |   | 470 |   |
| Stock  splits                                                                                  |   | 9,518,819         |   | 95                                   |   | (95                        | )      |      |   | 0 |   |
| Net income                                                                                     |   |              |   |                                 |   |                       |   | 24,919    |   | 24,919 |   |
| Balances, December 29,  2001                                                                   |   | 28,632,774        |   | $                                    | 286    |                       | $      | 48,522    |   | $ | 164,322 |   | $ | 213,130 |   |
|                                                                                           |   |              |   |                                 |   |                       |   |      |   |   |   |
| The accompanying  notes are an integral part of these consolidated financial statements.  |

 

16

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**MONACOCOACH CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**for the years ended January 1, 2000, December 30, 2000 andDecember 29, 2001**

*(inthousands of dollars)*

 

 
|                                                                                           |   | **1999** |   | **2000** |   | **2001** |   |
|------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| **Increase  (Decrease) in Cash**:                                                              |   |     |   |     |   |     |   |
|                                                                                           |   |     |   |     |   |     |   |
| Cash flows from operating activities:                                                          |   |     |   |     |   |     |   |
| Net  income                                                                                    |   | $        | 43,761 |     | $      | 42,521   |   | $ | 24,919 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:             |   |     |   |     |   |     |   |
| Depreciation  and amortization                                                                 |   | 5,904    |   | 6,359    |   | 7,543    |   |
| Gain  on disposal of equipment                                                                 |   |     |   |     |   | (74      | )      |
| Deferred  income taxes                                                                         |   | (1,491   | )      | 3,609    |   | 6,005    |   |
| Change in assets and liabilities:                                                              |   |     |   |     |   |     |   |
| Trade  receivables, net                                                                        |   | (465     | )      | (31,460  | )      | (13,154  | )      |
| Inventories                                                                                    |   | (28,030  | )      | (26,801  | )      | 12,682   |   |
| Prepaid  expenses                                                                              |   | (179     | )      | (724     | )      | (903     | )      |
| Accounts  payable                                                                              |   | 8,414    |   | 16,186   |   | (10,318  | )      |
| Income  taxes payable                                                                          |   | (2,743   | )      | (1,406   | )      | 0        |   |
| Accrued expenses  and other liabilities                                                        |   | 6,990    |   | (1,931   | )      | (5,720   | )      |
| Net cash  provided by operating activities                                                     |   | 32,161   |   | 6,353    |   | 20,980   |   |
| Cash flows from investing activities:                                                          |   |     |   |     |   |     |   |
| Additions  to property, plant and equipment                                                    |   | (32,228  | )      | (19,750  | )      | (10,210  | )      |
| Proceeds  from sale of assets                                                                  |   |     |   |     |   | 106      |   |
| Collections on notes receivable                                                                |   | 910      |   |     |   |     |   |
| Payment  for business acquisition                                                              |   |     |   |     |   | (24,320  | )      |
| Issuance of  notes receivable                                                             |   |     |   | (2,800   | )      | (5,357   | )      |
| Net cash used in  investing activities                                                         |   | (31,318  | )      | (22,550  | )      | (39,781  | )      |
| Cash flows from financing activities:                                                          |   |     |   |     |   |     |   |
| Book  overdraft                                                                                |   | 1,959    |   | 2,700    |   | (10,840  | )      |
| Borrowings  (payments) on line of credit, net                                                  |   | 6,213    |   | 12,732   |   | (10,930  | )      |
| (Payments)  borrowings on long-term notes payable                                              |   | (10,400  | )      |     |   | 40,000   |   |
| Issuance  of common stock                                                                      |   | 1,385    |   | 765      |   | 1,586    |   |
| Debt issuance  costs                                                                           |   |     |   |     |   | (1,015   | )      |
| Net cash (used  in) provided by financing activities                                           |   | (843     | )      | 16,197   |   | 18,801   |   |
| Net  change in cash                                                                            |   | 0        |   | 0        |   | 0        |   |
| Cash at  beginning of period                                                                   |   | 0        |   | 0        |   | 0        |   |
| Cash at end of period                                                                          |   | $        | 0      |     | $      | 0        |   | $ | 0 |   |
|                                                                                           |   |     |   |     |   |     |   |
| The accompanying notes  are an integral part of these consolidated financial statements.  |

** **

 

17

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**MONACO COACH CORPORATION**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

 ** 1.   BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:**

 

**Business**

 

Monaco Coach Corporationand its subsidiaries (the “Company”) manufacture premium motor coaches, busconversions and towable recreational vehicles at manufacturing facilities inOregon and Indiana.  These products aresold primarily to independent dealers throughout the United States and Canada.

 

Pursuant to  Statement of Financial Accounting Standards(SFAS) No. 131, “Disclosures about Segments of an Enterprise and RelatedInformation,” effective for fiscal years beginning after December 31, 1997, theCompany has determined that it has a single reportable operating segmentconsisting of the design, manufacture, and sale (wholesale) of recreationalvehicles including motor coaches and towable fifth wheel and traveltrailers.  These product lines havesimilar economic characteristics and are similar in the nature of products,manufacturing processes, customer characteristics, and distribution methods.

 

**Consolidation Policy**

 

The accompanyingconsolidated financial statements include the accounts of the Company and itswholly-owned subsidiaries.  All materialintercompany transactions and balances have been eliminated.

 

**Fiscal Period**

 

The Companyfollows a 52/53 week fiscal year period ending on the Saturday closest toDecember 31.  Interim periods also endon the Saturday closest to the calendar quarter end.  For 1999, 2000, and 2001, all fiscal periods were 52 weekslong.  All references to years in theconsolidated financial statements relate to fiscal years rather than calendaryears.

 

**Stock Splits**

 

On August 6, 2001,the Board of Directors declared a three-for-two stock split in the form of a50% stock dividend on the Company’s Common stock.  Accordingly, all historical weighted average share and per shareamounts have been restated to reflect the stock split.  Share amounts presented in the ConsolidatedStatement of Stockholders’ Equity reflect the actual share amounts outstandingfor each period presented.

 

**Estimates and Industry Factors**

 

Estimates - The preparation of financialstatements in conformity with accounting principles generally accepted in theUnited States of America, requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

Concentration ofCredit Risk - TheCompany distributes its products through an independent dealer network forrecreational vehicles.  Sales to onecustomer were approximately 10%, 12%, and 12% of net revenues for the fiscalyears ended January 1, 2000, December 30, 2000, and December 29, 2001,respectively.  No other individualdealers represented over 10% of net revenues in 1999, 2000, or 2001.  The loss of a significant dealer or asubstantial decrease in sales by such a dealer could have a material adverseeffect on the Company’s business, results of operations and financial results.

 

Concentrations ofcredit risk exist for accounts receivable and repurchase agreements (see Note16), primarily for the Company’s largest dealers.  The Company generally sells to dealers throughout the UnitedStates and there is no geographic concentration of credit risk.

 

 

18

----

 

 

Reliance on KeySuppliers - TheCompany’s production strategy relies on certain key suppliers’ ability todeliver subassemblies and component parts in time to meet manufacturingschedules.  The Company has a variety ofkey suppliers, including Allison, Workhorse, Cummins, Dana, and Ford.  The Company does not have any long-termcontracts with these suppliers or their distributors.  In 1997, Allison put all chassis manufacturers on allocation withrespect to one of the transmissions the Company uses, and in 1999 Ford put oneof its gasoline powered chassis on allocation. In light of these dependencies, it is possible that failure of Allison,Ford or any of the other suppliers to meet the Company’s future requirements fortransmissions, chassis or other key components could have a material near-termimpact on the Company’s business, results of operations and financialcondition.

 

Warranty Claims - Estimated warranty costs are providedfor at the time of sale of products with warranties covering the products forup to one year from the date of retail sale (five years for the front andsidewall frame structure, and three years on Magnum chassis).  These estimates are based on historicalaverage repair costs, as well as other reasonable assumptions as have beendeemed appropriate by management.

 

Litigation Claims - Estimated litigation costs areprovided for at the time of sale of products, or at the time a determination ismade that an estimable loss has occurred. These estimates are developed by legal counsel based on professionaljudgment, as well as historical experience.

 

**Inventories**

 

Inventoriesconsist of raw materials, work-in-process and finished recreational vehiclesand are stated at the lower of cost (first-in, first-out) or market.  Cost of work-in-process and finishedrecreational vehicles includes material, labor and manufacturing overheadcosts.

 

**Property, Plant and Equipment**

 

Property, plantand equipment, including significant improvements thereto, are stated at costless accumulated depreciation and amortization.  Cost includes expenditures for major improvements, replacementsand renewals and the net amount of interest cost associated with significantcapital additions during periods of construction.  Capitalized interest was $195,000 in 1999, $192,000 in 2000, andzero in 2001.  Maintenance and repairsare charged to expense as incurred. Replacements and renewals are capitalized.  When assets are sold, retired or otherwise disposed of, the costand accumulated depreciation are removed from the accounts and any resultinggain or loss is reflected in income.

 

The cost of plantand equipment is depreciated using the straight-line method over the estimateduseful lives of the related assets. Buildings are generally depreciated over 39 years and equipment isdepreciated over 3 to 10 years. Leasehold improvements are amortized under the straight-line methodbased on the shorter of the lease periods or the estimated useful lives.

 

At each balancesheet date, management assesses whether there has been permanent impairment inthe value of long-lived assets.  Theamount of any such impairment is determined by comparing anticipatedundiscounted future cash flows from operating activities with the associatedcarrying value.  The factors consideredby management in performing this assessment include current operating results,trends and prospects, as well as the effects of obsolescence, demand,competition and other economic factors.

 

 

19

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**Goodwill and Debt Issuance Costs**

 

Goodwillrepresents the excess of the cost of acquisition over the fair value of netassets acquired.  The Company is thesuccessor to a company formed in 1968 (the “Predecessor”) and commencedoperations on March 5, 1993 by acquiring substantially all of the assets andliabilities of the Predecessor.  Thegoodwill arising from the acquisition of the assets and operations of theCompany’s Predecessor in March 1993 has been amortized on a straight-line basisover 40 years and, at December 29, 2001, the unamortized amount was $16.1million.  In March 1996, the Companyacquired the Holiday Rambler Division of Harley-Davidson, Inc. (“HolidayRambler”).  The goodwill arising fromthe acquisition of Holiday Rambler has been amortized on a straight-line basisover 20 years and, at December 29, 2001, the unamortized amount was $1.8million.  The Company also recorded$37.9 million of goodwill associated with the August 2, 2001 acquisition of SMCCorporation (SMC).  For the fiscal yearended December 29, 2001, in accordance with the Financial Accounting StandardsBoard (FASB) Statement No. 142, “Accounting for Goodwill and Other IntangibleAssets”, no amortization of goodwill associated with the acquisition of SMC hasbeen recorded.

 

At each balancesheet date, management assesses whether there has been permanent impairment inthe value of goodwill.  The amount ofany such impairment is determined by comparing anticipated undiscounted futurecash flows from operating activities with the associated carrying value.  The factors considered by management inperforming this assessment include current operating results, trends andprospects, as well as the effects of obsolescence, demand, competition andother economic factors.  As of December29, 2001, in accordance with FASB Statement No. 121, management has determinedthat there has been no impairment of goodwill requiring a write down.

 

**Income Taxes**

 

Deferred taxes arerecognized based on the difference between the financial statement and taxbases of assets and liabilities at enacted tax rates in effect in the years inwhich the differences are expected to reverse. Deferred tax expense or benefit represents the change in deferred taxasset/liability balances.  A valuation allowanceis established for deferred tax assets when it is more likely than not that thedeferred tax asset will not be realized.

 

**Revenue Recognition**

 

The Companyrecognizes revenue from the sale of recreational vehicles upon shipment.

 

In December 1999, the Securities and ExchangeCommission issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognitionin Financial Statements.  SAB No. 101provides guidance for revenue recognition under certain circumstances.  The Company has complied with the guidanceprovided by SAB No. 101 for the fiscal years 1999, 2000 and 2001.

 

**Advertising Costs**

 

The Companyexpenses advertising costs as incurred, except for prepaid show costs which areexpensed when the event takes place. During 2001, approximately $10.1 million ($6.4 million in 1999 and $7.8million in 2000) of advertising costs were expensed.

 

 

20

----

 

 

**Research and Development Costs**

 

Research anddevelopment costs are charged to expense as incurred and were $6.2 million for2001 ($4.7 million in 1999 and $5.1 million for 2000).

 

**New Accounting Pronouncements**

 

In June 2001, theFinancial Accounting Standards Board (FASB or the “Board”) issued Statement ofFinancial Accounting Standards No. 141 (SFAS 141), Business Combinations, andNo. 142 (SFAS 142), Goodwill and Other Intangible Assets, collectively referredto as the “Standards”.  The provisionsof SFAS 141 (1) require that the purchase method of accounting be used for allbusiness combinations initiated after June 30, 2001, (2) provide specificcriteria for the initial recognition and measurement of intangible assets apartfrom goodwill, and (3) require that unamortized negative goodwill be writtenoff immediately as an extraordinary gain instead of being deferred andamortized. SFAS 141 also requires that upon adoption of SFAS 142 the Companyreclassify the carrying amounts of certain intangible assets into or out ofgoodwill, based on certain criteria. SFAS 142 primarily addresses theaccounting for goodwill and intangible assets subsequent to their initialrecognition. The provisions of SFAS 142 (1) prohibit the amortization ofgoodwill and indefinite-lived intangible assets, (2) require that goodwill andindefinite-lived intangible assets be tested annually for impairment (and ininterim periods if certain events occur indicating that the carrying value ofgoodwill and/or indefinite-lived intangible assets may be impaired), (3)require that reporting units be identified for the purpose of assessingpotential future impairments of goodwill, and (4) remove the forty-yearlimitation on  the amortization periodof intangible assets that have finite lives.

 

The Company willadopt the provisions of SFAS 142 in its first quarter of 2002. The Company ispreparing for its adoption of SFAS 142 and is making the determinations as towhat its reporting units are and what amounts of goodwill, intangible assets,other assets, and liabilities should be allocated to those reporting units. TheCompany expects that it will no longer record $645,000 of annual amortizationexpense relating to its existing goodwill and indefinite-lived intangibles, asadjusted for the reclassifications just mentioned.

 

SFAS 142 requiresthat goodwill be tested annually for impairment using a two-step process. Thefirst step is to identify a potential impairment and, in transition, this stepmust be measured as of the beginning of the fiscal year. However, a company hassix months from the date of adoption to complete the first step. The Companyexpects to complete that first step of the goodwill impairment test during thefirst quarter of 2002. The second step of the goodwill impairment test measuresthe amount of the impairment loss (measured as of the beginning of the year ofadoption), if any, and must be completed by the end of the Company’s fiscalyear. Intangible assets deemed to have an indefinite life will be tested forimpairment using a one-step process which compares the fair value to thecarrying amount of the asset as of the beginning of the fiscal year, andpursuant to the requirements of SFAS 142 will be completed during the firstquarter of 2002. Any impairment loss resulting from the transitional impairmenttests will be reflected as the cumulative effect of a change in accounting principlein the first quarter of 2002.  TheCompany is in the process of assessing the impact of SFAS 142 on the financialstatements.

 

 

21

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In June 2001, FASB issued Statement No. 143, Accounting for Asset RetirementObligations.  FASB Statement No. 143 iseffective for the fiscal years beginning after June 15, 2002.  FASB Statement No. 143, addresses financialaccounting and reporting for obligations associated with the retirement oftangible long-lived assets and the associated asset retirement costs. FASBStatement No. 143 requires that the fair value of a liability for an assetretirement obligation be recognized in the period in which it is incurred if areasonable estimate of fair value can be made. The associated asset retirementcosts are capitalized as part of the carrying amount of the long-lived asset.The impact of this pronouncement on the Company’s financial statements is notexpected to be material.

 

In August 2001, FASB issued statement No. 144, Accounting for theImpairment or Disposal of Long-Lived Assets. FASB Statement No. 144 iseffective for the fiscal years beginning after December 15, 2001. Thisstatement supersedes FASB Statement No. 121, Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to Be Disposed Of, and theaccounting and reporting provisions of APB Opinion No. 30, Reporting theResults of Operations — Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions, for the disposal of a segment of a business. FASB Statement No.121 did not address the accounting for a segment of a business accounted for asa discontinued operation under APB Opinion No. 30, accordingly two accounting modelsexisted for long-lived assets to be disposed of.  FASB Statement No. 144, establishes a single accounting model,based on the framework established in Statement No. 121, for long-lived assetsto be disposed of by sale. In addition, FASB Statement No. 144 resolvessignificant implementation issues related to Statement No. 121.  The Company is in the process of assessingthe impact of SFAS 144 on the financial statements.

 

 

**Supplemental Cash Flow Disclosures:**
|                                                                              |   | **1999**           |   | **2000** |   | **2001** |   |
|-----------------------------------------------------------------------------------|--------|--------------------|--------|----------|--------|----------|--------|
|                                                                              |   | **(in thousands)** |   |
| Cash paid during the period for:                                                  |   |               |   |     |   |     |   |
| Interest,  net of amount capitalized of $195 in 1999, $192 in 2000 and $0 in 2001 |   | $                  | 1,131  |     | $      | 632      |   | $ | 2,206 |   |
| Income  taxes                                                                     |   | 30,823             |   | 28,226   |   | 16,231   |   |
|                                                                                   |        |                    |        |          |        |          |        |  |  |  |

 

**2.     ACQUISITION OF SMC CORPORATION:**

** **

The Companyannounced on June 25, 2001 that it had reached an agreement with Oregon basedmotor home manufacturer SMC Corporation (“SMC”) to acquire all of theoutstanding shares of SMC pursuant to a cash tender offer at a price of $3.70per share.  On August 6, 2001, theCompany completed the back-end merger, and owned 100% of the shares.

 

 

22

----

 

** **

The cash paid for SMC, including transaction costs of$3,062,000, totaled $24,320,000.  Thetotal assets acquired and liabilities assumed of SMC based on estimated fairvalues at August 6, 2001, is as follows:

 

|                                           |   | **(in thousands)** |    |
|------------------------------------------------|--------|--------------------|---------|
| Receivables                                    |   | $                  | 1,733   |   |
| Inventories                                    |   | 25,360             |    |
| Deferred  tax asset                            |   | 19,469             |    |
| Property  and equipment                        |   | 15,850             |    |
| Prepaids  and other assets                     |   | 114                |    |
| Goodwill                                       |   | 37,919             |    |
| Total  assets acquired                         |   | 100,445            |    |
|                                           |   |               |    |
| Book  overdraft                                |   | (1,551             | )       |
| Notes  payable                                 |   | (16,349            | )       |
| Accounts  payable                              |   | (24,079            | )       |
| Accrued  liabilities                           |   | (34,146            | )       |
| Total  liabilities assumed                     |   |               | (76,125 | ) |
|                                           |   |               |    |
| Total assets acquired  and liabilities assumed |   | $                  | 24,320  |   |

 

The allocation ofthe purchase price and the related goodwill is subject to adjustment uponresolution of pre-SMC Acquisition contingencies.  The effects of resolution of pre-SMC Acquisition contingenciesoccurring: (i) within one year of the acquisition date will be reflected as anadjustment of the allocation of the purchase price and of goodwill, and (ii)after one year they will be recognized in the determination of net income.

 

 

The followingunaudited pro forma information presents the consolidated results as if theacquisition had occurred at the beginning of the period and giving effect tothe adjustments for the related interest on financing the purchase price,goodwill and depreciation.  The proforma information does not necessarily reflect results that would have occurredor is it necessarily indicative of future operating results.

|                               |   | **2000**                                  |      | **2001** |   |
|------------------------------------|--------|-------------------------------------------|-----------|----------|--------|
|                               |   | **(in thousands, except per share data)** |      |
| Net  sales                         |   | $                                         | 1,093,000 |     | $      | 1,015,000 |   |
| Net  income                        |   | 36,000                                    |      | 14,000   |   |
|                               |   |                                      |      |     |   |
| Diluted  earnings per common share |   | $                                         | 1.25      |     | $      | 0.48 |   |

 

 

23

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**3.  INVENTORIES:**

 

                Inventories consist of the following:

 

|            |   | **December  30,**

**2000** | ** ** | **December  29,**

**2001** | ** ** |
|-----------------|--------|-----------------------------|------------|-----------------------------|------------|
|            |   | ** **                  | ** ** |
|            |   | **(in thousands)**          | ** ** |
| Raw  materials  |   | $                           | 45,187     |                        | $          | 53,160 |   |
| Work-in-process |   | 31,739                      |       | 44,436                      |       |
| Finished units  |   | 37,471                      |       | 29,479                      |       |
|            |   | $                           | 114,397    |                        | $          | 127,075 |   |

 

** **

**4.  PROPERTY, PLANT AND EQUIPMENT:**

 

                Property, plant and equipment consist of thefollowing:

 

|                                            |   | **December  30,**

**2000** | ** ** | **December  29,**

**2001** | ** ** |
|-------------------------------------------------|--------|-----------------------------|------------|-----------------------------|------------|
|                                            |   | ** **                  | ** ** |
|                                            |   | **(in thousands)**          | ** ** |
| Land                                            |   | $                           | 6,687      |                        | $          | 11,999 |   |
| Buildings                                       |   | 83,564                      |       | 99,333                      |       |
| Equipment                                       |   | 20,559                      |       | 22,838                      |       |
| Furniture  and fixtures                         |   | 6,644                       |       | 9,479                       |       |
| Vehicles                                        |   | 1,232                       |       | 1,571                       |       |
| Leasehold  improvements                         |   | 854                         |       | 1,472                       |       |
| Construction in  progress                       |   | 3,504                       |       | 2,376                       |       |
|                                            |   | 123,044                     |       | 149,068                     | ** ** |
| Less accumulated  depreciation and amortization |   | 19,454                      |       | 26,273                      |       |
|                                            |   | $                           | 103,590    |                        | $          | 122,795 | ** ** |

 

** **

**5.  ACCRUED EXPENSES AND OTHER LIABILITIES:**

 

|                                    |   | **December  30,**

**2000** | ** ** | **December  29,**

**2001** | ** ** |
|-----------------------------------------|--------|-----------------------------|------------|-----------------------------|------------|
|                                    |   | ** **                  | ** ** |
|                                    |   | **(in thousands)**          | ** ** |
| Payroll,  vacation and related accruals |   | $                           | 11,371     |                        | $          | 12,580 |   |
| Payroll  and property taxes             |   | 1,491                       |       | 1,172                       |       |
| Reserve  for warranty claims            |   | 15,479                      |       | 29,721                      |       |
| Reserve  for product liability claims   |   | 6,391                       |       | 17,597                      |       |
| Promotional  and advertising            |   | 1,271                       |       | 1,345                       |       |
| Other                                   |   | 2,475                       |       | 4,489                       |       |
|                                    |   | $                           | 38,478     |                        | $          | 66,904 |   |

 

24

----

 

 

** 6.    LINE OF CREDIT:**

 

During the thirdquarter of 2001, the Company obtained a new credit facility from a consortiumof lenders.  The Company’s new permanentcredit facility consists of a revolving line of credit of up to $70.0 million(the “Revolving Loan”).  At the electionof the Company, the Revolving Loan bears interest at variable rates based onthe Prime Rate or LIBOR.  The RevolvingLoan is due and payable in full on September 30, 2004, and requires monthlyinterest payments.  The balanceoutstanding under the Revolving Loan at December 29, 2001 was $26.0million.  The Revolving Loan iscollateralized by all of the assets of the Company, and include variousrestrictions and financial covenants.

 

The weightedaverage interest rate on the outstanding borrowings under the revolving line ofcredit was 8.9% and 5.8% for 2000 and 2001, respectively.  Interest expense on the unused availableportion of the line was $44,000 or 0.4% and $85,000 or 0.2% of weighted averageoutstanding borrowings for 2000 and 2001, respectively.  The revolving line of credit iscollateralized by all the assets of the Company.  The agreement contains restrictive covenants as to the Company’sleverage ratio, current ratio, fixed charge coverage ratio and tangible networth.  As of December 29, 2001, theCompany was in compliance with these covenants.

 

**7.     LONG-TERM NOTE PAYABLE:**

** **

The Company has a long-term note payable of $40million outstanding at December 29, 2001. The term note bears interest at varying rates that fluctuate based onthe Prime rate or LIBOR, and are determined based on the Company’s leverageratio.  The term note requires monthlyinterest payments and quarterly principal payments and is collateralized by allthe assets of the Company.  The termnote is due and payable in full on September 28, 2005.  As of December 29, 2001, the interest rateon the term debt was 3.94%.

 

The following table displays the scheduled principalpayments by year that will be due on the term loan.

** **

| **Year** |   | **Amount of payment due** |   |
|----------|--------|---------------------------|--------|
| 2002     |   | $                         | 10,000 |   |   |
| 2003     |   | $                         | 12,500 |   |   |
| 2004     |   | $                         | 10,000 |   |   |
| 2005     |   | $                         | 7,500  |   |   |
|     |   | $                         | 40,000 |   | ** ** |

 

**8.   PREFERRED STOCK:**

 

The Company hasauthorized “blank check” preferred stock (1,934,783 shares authorized, $.01 parvalue) (“Preferred Stock”), which may be issued from time to time in one ormore series upon authorization by the Company’s Board of Directors.  The Board of Directors, without furtherapproval of the stockholders, is authorized to fix the dividend rights andterms, conversion rights, voting rights, redemption rights and terms,liquidation preferences, and any other rights, preferences, privileges andrestrictions applicable to each series of the Preferred Stock.  There were no shares of Preferred Stockoutstanding as of December 30, 2000 or December 29, 2001.

 

25

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**9.   INCOME TAXES:**

 

The provision forincome taxes is as follows:

 

|                        |   | **1999**           |       | **2000** |   | **2001** |   |
|-----------------------------|--------|--------------------|------------|----------|--------|----------|--------|
|                        |   | **(in thousands)** | ** ** |
| Current:                    |   |               |       |     |   |     |   |
| Federal                     |   | $                  | 24,439     |     | $      | 19,120   |   | $ | 8,262 |   |
| State                       |   | 5,133              |       | 4,130    |   | 1,606    |   |
|                        |   | 29,572             |       | 23,250   |   | 9,868    |   |
| Deferred:                   |   |               |       |     |   |     |   |
| Federal                     |   | (1,222             | )          | 2,945    |   | 4,880    |   |
| State                       |   | (269               | )          | 664      |   | 968      |   |
| Provision for income  taxes |   | $                  | 28,081     |     | $      | 26,859   |   | $ | 15,716 |   |

 

 

The reconciliationof the provision for income taxes at the U.S. federal statutory rate to theCompany’s effective income tax rate is as follows:

 

|                                                   |   | **1999**           |       | **2000** |   | **2001** | ** ** |
|--------------------------------------------------------|--------|--------------------|------------|----------|--------|----------|------------|
|                                                   |   | **(in thousands)** | ** ** |
| Expected  U.S. federal income taxes at statutory rates |   | $                  | 25,145     |     | $      | 24,283   |       | $ | 14,222 |   |
| State  and local income taxes, net of federal benefit  |   | 3,162              |       | 3,116    |   | 1,673    |       |
| Other                                                  |   | (226               | )          | (540     | )      | (179     | )          |
|                                                   |   | $                  | 28,081     |     | $      | 26,859   |       | $ | 15,716 |   |

 

 

 

 

The components ofthe current net deferred tax asset and long-term net deferred tax liability are:

 

|                                       |   | **December  30,**

**2000** |   | **December  29,**

**2001** |   |
|--------------------------------------------|--------|-----------------------------|--------|-----------------------------|--------|
| Current deferred income tax assets:        |   |                        |   |                        |   |
| Warranty  liability                        |   | $                           | 6,121  |                        | $      | 11,909 |   |
| Product  liability                         |   | 2,527                       |   | 6,376                       |   |
| Inventory  reserves                        |   | 1,853                       |   | 3,144                       |   |
| Payroll  and related accruals              |   | 958                         |   | 1,911                       |   |
| Other accruals                             |   | 1,738                       |   | 3,987                       |   |
|                                       |   | $                           | 13,197 |                        | $      | 27,327 |   |
| Long-term deferred income tax liabilities: |   |                        |   |                        |   |
| Depreciation                               |   | $                           | 5,197  |                        | $      | 8,741 |   |
| Amortization                               |   | 2,449                       |   | 2,846                       |   |
| Net  operating loss (NOL) carryforward     |   | 0                           |   | (6,070                      | )      |
| Valuation  allowance on NOL carryforward   |   | 0                           |   | 2,795                       |   |
|                                       |   | $                           | 7,646  |                        | $      | 8,312 |   |

 

 

26

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Managementbelieves that the temporary differences which gave rise to the deferred incometax assets will be realized in the foreseeable future, except for benefitsarising from the NOL carryforward associated with the SMC Acquisition.  Accordingly, management has provided avaluation allowance for the portion of the NOL carryforward that may not befully recognized.

** **

**10.  EARNINGS PER SHARE:**

 

Basic earnings percommon share is based on the weighted average number of shares outstandingduring the period using net income attributable to common stock as thenumerator.  Diluted earnings per commonshare is based on the weighted average number of shares outstanding during theperiod, after consideration of the dilutive effect of stock options andconvertible preferred stock, using net income as the numerator.  The weighted average number of common sharesused in the computation of earnings per common share for the years endedJanuary 1, 2000, December 30, 2000, and December 29, 2001 are as follows:

 

|                                              |   | **1999**   |   | **2000**   |   | **2001**   |   |
|---------------------------------------------------|--------|------------|--------|------------|--------|------------|--------|
| **Basic**                                         |   |       |   |       |   |       |   |
| Issued  and outstanding shares (weighted average) |   | 28,213,445 |   | 28,377,123 |   | 28,531,593 |   |
|                                              |   |       |   |       |   |       |   |
| **Effect  of Dilutive Securities**                |   |       |   |       |   |       |   |
| Stock  options                                    |   | 837,009    |   | 601,142    |   | 757,095    |   |
|                                              |   |       |   |       |   |       |   |
| **Diluted**                                       |   | 29,050,454 |   | 28,978,265 |   | 29,288,688 |   |

 

 

 

**11.     LEASES:**

 

The Company hascommitments under certain noncancelable operating leases.   Total rental expense for the fiscal years endedJanuary 1, 2000, December 30, 2000, and December 29, 2001 related to operatingleases amounted to approximately $1.0 million, $2.4 million and $2.8 million,respectively.  The Company's mostsignificant lease is a two-year operating lease for an aircraft with annualrenewals for up to three additional years. The future minimum rental commitments under the initial term of thislease are $1.4 million in both 2002 and 2003. In addition, if the Company chooses the return option at the end of theinitial lease term in February of 2004, the Company has guaranteed up to $16million of any deficiency in the event that the Lessor's net sales proceeds ofthe aircraft are less than $18.5 million.

 

Approximate futureminimum rental commitments under these leases at December 29, 2001 aresummarized as follows:

 

| **Fiscal  Year**      |   | **(in thousands** | **)**  |
|-----------------------|--------|-------------------|--------|
| 2002                  |   | 2,938             |   |
| 2003                  |   | 2,182             |   |
| 2004                  |   | 682               |   |
| 2005                  |   | 675               |   |
| 2006                  |   | 675               |   |
| 2007 and 

thereafter |   | 5,008             |   |

 

 

27

----

 

 

**12.    BONUS PLAN:**

 

The Company has adiscretionary bonus plan for certain key employees.  Bonus expense included in selling, general and administrativeexpenses for the years ended January 1, 2000, December 30, 2000, and December29, 2001 was $8.0 million, $9.0 million and $6.1 million, respectively.

 

 

**13.    STOCK OPTION PLANS:**

 

The Company has anEmployee Stock Purchase Plan (the “Purchase Plan”) - 1993, a  Non-employee Director Stock Option Plan (the“Director Plan”) - 1993, and an Incentive Stock Option Plan (the “Option Plan”)- 1993:

 

**Stock Purchase Plan**

 

The Company’sPurchase Plan qualifies under Section 423 of the Internal Revenue Code.  The Company has reserved 683,087 shares ofCommon Stock for issuance under the Purchase Plan.  During the years ended December 30, 2000 and December 29, 2001,52,725 shares and 64,643 shares, respectively, were purchased under thePurchase Plan.  The weighted-averagefair value of purchase rights granted in 2000 and 2001 was $9.57 and $8.74, respectively.  Under the Purchase Plan, an eligibleemployee may purchase shares of common stock from the Company through payrolldeductions of up to 10% of base compensation, at a price per share equal to 85%of the lesser of the fair market value of the Company’s Common Stock as of thefirst day (grant date) or the last day (purchase date) of each six-monthoffering period under the Purchase Plan.

 

The Purchase Planis administered by a committee appointed by the Board.  Any employee who is customarily employed forat least 20 hours per week and more than five months in a calendar year by theCompany, or by any majority-owned subsidiary designated from time to time bythe Board, and who does not own 5% or more of the total combined voting poweror value of all classes of the Company’s outstanding capital stock, is eligibleto participate in the Purchase Plan.

 

**Directors’ Option Plan**

 

Each non-employeedirector of the Company is entitled to participate in the Company’s “DirectorPlan”.  The Board of Directors and thestockholders have authorized a total of 352,500 shares of Common Stock forissuance pursuant to the Director Plan. Under the terms of  the DirectorPlan, each eligible non-employee director is automatically granted an option topurchase 8,000 shares of Common Stock (the “Initial Option”) on the later ofthe effective date of the Company’s initial public offering or the date onwhich the optionee first becomes a director of the Company.  Thereafter, each optionee is automaticallygranted an additional option to purchase 3,500 shares of Common Stock (a“Subsequent Option”) on September 30 of each year if, on such date, theoptionee has served as a director of the Company for at least six months.  Each Initial Option vests over five years atthe rate of 20% of the shares subject to the Initial Option at the end of eachanniversary following the date of grant. Each Subsequent Option vests in full on the fifth anniversary of itsdate of grant.  The exercise price of eachoption is the fair market value of the Common Stock as determined by the closingprice reported by the New York Stock Exchange on the date of grant.  As of December 29, 2001, 24,300 options hadbeen exercised, and options to purchase 135,750 shares of common stock wereoutstanding.

 

 

28

----

 

 

**Option Plan**

 

The Option Planprovides for the grant to employees of incentive stock options within themeaning of Section 422 of the Internal Revenue Code of 1986, as amended (the“Code”), and for the grant to employees and consultants of the Company ofnonstatutory stock options.  A total of2,657,813 shares of Common Stock have been reserved for issuance under theOption Plan.  As of December 29, 2001,options to purchase 1,235,023 shares of Common Stock were outstanding.  These options vest ratably over five yearscommencing with the date of grant.

 

The exercise priceof all incentive stock options granted under the Option Plan must be at leastequal to the fair market value of a share of the Company’s Common Stock on thedate of grant.  With respect to anyparticipant possessing more than 10% of the voting power of the Company’soutstanding capital stock, the exercise price of any option granted must equalat least 110% of the fair market value on the grant date, and the maximum termof the option must not exceed five years. The terms of all other options granted under the Option Plan may notexceed ten years.

 

Transactionsinvolving the Director Plan and the Option Plan are summarized withcorresponding weighted-average exercise prices as follows:

 
|                              |   | **Shares** |   | **Price** |   |
|-----------------------------------|--------|------------|--------|-----------|--------|
| Outstanding  at January 2, 1999   |   | 1,172,317  |   | $         | 3.99   |   |
| Granted                           |   | 232,727    |   | 10.44     |   |
| Exercised                         |   | (186,398   | )      | 3.48      |   |
| Forfeited                         |   | (4,458     | )      | 5.62      |   |
| Outstanding  at January 1, 2000   |   | 1,214,188  |   | 5.99      |   |
| Granted                           |   | 206,851    |   | 12.43     |   |
| Exercised                         |   | (68,810    | )      | 3.25      |   |
| Forfeited                         |   | (14,661    | )      | 7.93      |   |
| Outstanding  at December 30, 2000 |   | 1,337,568  |   | 6.48      |   |
| Granted                           |   | 218,401    |   | 12.42     |   |
| Exercised                         |   | (140,163   | )      | 3.95      |   |
| Forfeited                         |   | (45,033    | )      | 8.21      |   |
| Outstanding at December  29, 2001 |   | 1,370,773  |   | $         | 7.62   |   |

 

For various priceranges, weighted average characteristics of all outstanding stock options atDecember 29, 2001 were as follows:  
|                              |          | **Options  Outstanding** |    | **Options  Exercisable**                   |   |
|-----------------------------------|---------------|--------------------------|---------|--------------------------------------------|--------|
| **Range of**

**Exercise Prices** |          | **Shares**               |    | **Remaining**

** Life**

**(years)** |   | **Weighted-  Average**

** Price** |   | **Shares** |   | **Weighted-  Average**

** Price** |   |
| $                                 | 1.62          |                     | 94,786  |                                       | 1.2    |   | $ | 0.65 |   | 94,786 |   | $ | 0.65 |   |
| $                                 | 1.63 - 3.25   |                     | 268,286 |                                       | 3.3    |   | 2.81 |   | 268,286 |   | 2.81 |   |
| $                                 | 3.26 - 4.88   |                     | 155,909 |                                       | 5.1    |   | 3.59 |   | 102,236 |   | 3.52 |   |
| $                                 | 6.50 - 8.13   |                     | 230,263 |                                       | 6.3    |   | 7.73 |   | 123,729 |   | 7.74 |   |
| $                                 | 9.75 - 11.38  |                     | 228,827 |                                       | 7.4    |   | 10.32 |   | 77,521 |   | 10.25 |   |
| $                                 | 11.39 - 13.00 |                     | 358,952 |                                       | 8.8    |   | 12.30 |   | 32,790 |   | 12.66 |   |
| $                                 | 13.01 - 14.63 |                     | 14,000  |                                       | 9.8    |   | 14.25 |   | — |   | — |   |
| $                                 | 14.64 - 16.25 |                     | 19,750  |                                       | 9.4    |   | 16.19 |   | — |   | — |   |
|                              |          | 1,370,773                |    |                                       |   |   |   | 699,348 |   |   |   |
|                                   |               |                          |         |                                            |        |  |  |  |  |  |  |  |  |  |

 

 

 

29

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The Companycomplies with the disclosure-only provisions of SFAS No. 123, “Accounting forStock-Based Compensation”, and thus no compensation cost has been recognizedfor the Director Plan, the Option Plan or the Purchase Plan.  Had compensation cost for the threestock-based compensation plans been determined based on the fair value ofoptions at the date of grant consistent with the provisions of SFAS No. 123,the Company’s pro forma net income and pro forma earnings per share would havebeen as follows:

 

|                                           |   | **1999**                                  |   | **2000** |   | **2001** |   |
|------------------------------------------------|--------|-------------------------------------------|--------|----------|--------|----------|--------|
|                                           |   | **(In thousands, except per share data)** |   |
| Net  income — as reported                 |   | $                                         | 43,761 |     | $      | 42,521   |   | $ | 24,919 |   |
| Net  income — pro forma                   |   | 43,067                                    |   | 41,743   |   | 23,880   |   |
|                                           |   |                                      |   |     |   |     |   |
| Diluted  earnings per share — as reported |   | $                                         | 1.51   |     | $      | 1.47     |   | $ | 0.85 |   |
| Diluted  earnings per share — pro forma   |   | 1.48                                      |   | 1.44     |   | 0.82     |   |

 

The pro formaeffect on net income for 1999, 2000 and 2001 is not representative of the proforma effect in future years because compensation expense related to grantsmade in prior years is not considered. For purposes of the above pro forma information, the fair value of eachoption grant was estimated at the date of grant using the Black-Scholes optionpricing model with the following weighted average assumptions:

 

|                      |   | **1999** |   | **2000** |   | **2001** |   |
|---------------------------|--------|----------|--------|----------|--------|----------|--------|
| Risk-free  interest rate  |   | 5.29     | %      | 6.27     | %      | 4.42     | %      |
| Expected  life (in years) |   | 6.65     |   | 5.68     |   | 6.23     |   |
| Expected  volatility      |   | 55.65    | %      | 54.63    | %      | 55.02    | %      |
| Expected  dividend yield  |   | 0.00     | %      | 0.00     | %      | 0.00     | %      |

 

**14.  FAIR VALUE OF FINANCIAL INSTRUMENTS:**

 

The fair value ofthe Company’s financial instruments are presented below.  The estimates require subjective judgmentsand are approximate.  Changes inmethodologies and assumptions could significantly affect estimates.

 

Line of Credit - The carrying amount outstanding on therevolving line of credit is $20.6 million and $26.0 million at December 30,2000 and December 29, 2001, respectively, which approximates the estimated fairvalue as this instrument requires interest payments at a market rate ofinterest plus a margin.

 

Long-term NotePayable - Thecarrying amount outstanding on the long-term note payable is $40.0 million(including $10.0 million of current payable) at December 29, 2001, whichapproximates the estimated fair value as this instrument requires interestpayments at a market rate of interest plus a margin.

 

 

 

**15.  401(K) DEFINED CONTRIBUTION PLAN:**

 

The Companysponsors a 401(k) defined contribution plan covering substantially allfull-time employees.  Companycontributions to the plan totaled $571,000 in 1999, $593,000 in 2000 and$629,000 in 2001.

 

30

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**16.  COMMITMENTS AND CONTINGENCIES:**

** **

**Repurchase Agreements**

 

Substantially allof the Company’s sales to independent dealers are made on terms requiring cashon delivery.  The Company does notfinance dealer purchases.  However, mostpurchases are financed on a “floor plan” basis by a bank or finance companywhich lends the dealer all or substantially all of the wholesale purchase priceand retains a security interest in the vehicles.  Upon request of a lending institution financing a dealer’spurchases of the Company’s product, the Company will execute a repurchaseagreement.  These agreements providethat, for up to 18 months after a unit is shipped, the Company will repurchasea dealer’s inventory in the event of a default by a dealer to its lender.

 

The Company’sliability under repurchase agreements is limited to the unpaid balance owed tothe lending institution by reason of its extending credit to the dealer topurchase its vehicles, reduced by the resale value of vehicles which may berepurchased.  The risk of loss is spreadover numerous dealers and financial institutions.

 

No significant netlosses were incurred during the years ended January 1, 2000, December 30, 2000or December 29, 2001.  The approximateamount subject to contingent repurchase obligations arising from theseagreements at December 29, 2001 is $366.8 million, with approximately 7.44%concentrated with one dealer.  If theCompany were obligated to repurchase a significant number of recreationalvehicles in the future, losses and reduction in new recreational vehicle salescould result.

 

**Product Liability**

 

The Company issubject to regulations which may require the Company to recall products withdesign or safety defects, and such recall could have a material adverse effecton the Company’s business, results of operations and financial condition.

 

The Company hasfrom time to time been subject to product liability claims.  To date, the Company has been successful inobtaining product liability insurance on terms the Company considersacceptable.  The terms of the policycontain a self-insured retention amount of $100,000 per occurrence, with amaximum annual aggregate self-insured retention of $1.0 million.  Overall product liability insurance,including umbrella coverage, is available to a maximum amount of $100.1 millionfor each occurrence and an annual aggregate of $102.0 million.  There can be no assurance that the Companywill be able to obtain insurance coverage in the future at acceptable levels orthat the cost of insurance will be reasonable. Furthermore, successful assertion against the Company of one or a seriesof large uninsured claims, or of one or a series of claims exceeding anyinsurance coverage, could have a material adverse effect on the Company’sbusiness, results of operations and financial condition.

 

**Litigation**

 

The Company isinvolved in various legal proceedings which are incidental to the industry andfor which certain matters are covered in whole or in part by insurance or,otherwise, the Company has recorded accruals for estimated settlements.  Management believes that any liability whichmay result from these proceedings will not have a material adverse effect onthe Company’s consolidated financial statements.

 

31

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**Debt Guarantee**

 

In 2000, theCompany loaned $2.8 million to Outdoor Resorts of Las Vegas (“ORLV”) for thepurpose of constructing a luxury motor coach resort in Las Vegas, Nevada, andan additional amount of $5.3 million in 2001 for resorts in Naples, Florida andIndio, California.  Accrued interestreceivable from the loans was $639,000 at December 29, 2001, of which approximately$200,000 was in arrears due to delays in development of the project in LasVegas, Nevada.

 

As part of thefinancing structure for the new resorts, the Company also agreed to act asco-guarantor with ORLV’s parent company, Outdoor Resorts of America (“ORA”), ona $12.0 million construction loan.  Inreturn for the Company’s loan and guarantee commitment, ORLV has agreed to payinterest and income participation to the Company.  At December 29, 2001, ORLV had drawn $9.7 million on theconstruction loan.

 

**17.    QUARTERLY RESULTS (UNAUDITED):**

 
| **Year ended January 1, 2000**   |   | **1st  Quarter**                           |    | **2nd  Quarter** |   | **3rd  Quarter** |   | **4th  Quarter** |    |
|----------------------------------|--------|--------------------------------------------|---------|------------------|--------|------------------|--------|------------------|---------|
|                             |   | **(In thousands, except per share data)**  |    |
| Net sales                        |   | $                                          | 193,201 |             | $      | 199,178          |   | $                | 196,694 |   | $ | 191,742 |   |
| Gross  profit                    |   | 29,164                                     |    | 31,347           |   | 30,998           |   | 30,770           |    |
| Operating  income                |   | 17,300                                     |    | 18,919           |   | 18,373           |   | 18,251           |    |
| Net  income                      |   | 9,878                                      |    | 11,457           |   | 11,227           |   | 11,199           |    |
| Earnings per common share:       |   |                                       |    |             |   |             |   |             |    |
| Basic                            |   | $                                          | 0.35    |             | $      | 0.41             |   | $                | 0.40    |   | $ | 0.40 |   |
| Diluted                          |   | $                                          | 0.34    |             | $      | 0.39             |   | $                | 0.39    |   | $ | 0.38 |   |
|                             |   |                                       |    |             |   |             |   |             |    |
| **Year ended December 30, 2000** |   | **1st Quarter**                            |    | **2nd Quarter**  |   | **3rd Quarter**  |   | **4th Quarter**  |    |
|                             |   | **(In thousands, except per  share data)** |    |
| Net sales                        |   | $                                          | 237,983 |             | $      | 226,091          |   | $                | 226,393 |   | $ | 211,423 |   |
| Gross  profit                    |   | 37,314                                     |    | 32,117           |   | 30,908           |   | 29,311           |    |
| Operating  income                |   | 21,375                                     |    | 18,217           |   | 16,143           |   | 14,095           |    |
| Net  income                      |   | 12,918                                     |    | 11,148           |   | 9,807            |   | 8,648            |    |
| Earnings per common share:       |   |                                       |    |             |   |             |   |             |    |
| Basic                            |   | $                                          | 0.46    |             | $      | 0.39             |   | $                | 0.35    |   | $ | 0.30 |   |
| Diluted                          |   | $                                          | 0.44    |             | $      | 0.39             |   | $                | 0.34    |   | $ | 0.30 |   |
|                             |   |                                       |    |             |   |             |   |             |    |
| **Year ended December 29, 2001** |   | **1st Quarter**                            |    | **2nd Quarter**  |   | **3rd Quarter**  |   | **4th Quarter**  |    |
|                             |   | **(In thousands, except per  share data)** |    |
| Net  sales                       |   | $                                          | 211,228 |             | $      | 223,424          |   | $                | 240,831 |   | $ | 261,590 |   |
| Gross  profit                    |   | 25,488                                     |    | 25,804           |   | 30,548           |   | 32,150           |    |
| Operating  income                |   | 9,088                                      |    | 9,153            |   | 11,438           |   | 12,979           |    |
| Net  income                      |   | 5,197                                      |    | 5,480            |   | 6,623            |   | 7,619            |    |
| Earnings per common share:       |   |                                       |    |             |   |             |   |             |    |
| Basic                            |   | $                                          | 0.18    |             | $      | 0.19             |   | $                | 0.23    |   | $ | 0.27 |   |
| Diluted                          |   | $                                          | 0.18    |             | $      | 0.19             |   | $                | 0.23    |   | $ | 0.26 |   |

 

 

32

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**PART IV**

 

**ITEM 14.****                                             ****EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ONFORM 8-K**

 

(a)   The following documents are filed as part ofthis Report on Form 10-K:

 

1.     Financial Statements.  The Consolidated Financial Statements ofMonaco Coach Corporation  and the Reportof Independent Accountants are filed in Item 8 within this Annual Reporton Form 10-K.

 

2.     Financial Statement Schedule.  The following financial statement scheduleof Monaco Coach Corporation for the fiscal years ended January 1, 2000,December 30, 2000 and December 29, 2001 is filed as part of this Annual Reporton Form 10-K and should be read in conjunction with the ConsolidatedFinancial Statements, and related notes thereto, of Monaco Coach Corporation.

 

| **Schedule** |   |                               |   | **Page** |   |
|--------------|--------|------------------------------------|--------|----------|--------|
| II           |   | Valuation and  Qualifying Accounts |   | 52       |   |

 

Schedules notlisted above have been omitted because they are not applicable or are notrequired or the information required to be set forth therein is included in theconsolidated financial statements or notes thereto.

 

3.     Exhibits.  The following Exhibits are filed as part of, or incorporated byreference into, this Report on Form 10-K.

 
| 3.1    |   | Amended and Restated Certificate of Incorporation of the Registrant  (Incorporated herein by reference to Exhibit (3.1) to the Registrant’s Annual  Report on Form 10-K for the year ended January 1, 1994).                                                          |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                       |
| 3.2    |   | Certificate of  Amendment of Amended & Restated Certificate of Incorporation dated June  30, 1999 (Incorporated herein by reference to Exhibit (3.2) to the  Registrant’s Annual Report on Form 10-K for the year ended January 1, 2000).                         |
|   |   |                                                                                                                                                                                                                                                                       |
| 3.3    |   | Bylaws of Registrant, as amended to date (Incorporated herein by  reference to Exhibit (3.2) to the Registrant’s Annual Report on Form 10-K for  the year ended January 1, 1994).                                                                                     |
|   |   |                                                                                                                                                                                                                                                                       |
| 10.1   |   | Form of Indemnification Agreement for directors and executive  officers (Incorporated herein by reference to Exhibit (10.2) to the  Registrant’s Registration Statement on Form S-1 (Reg. No. 33-67374) declared  effective on September 23, 1993).                   |
|   |   |                                                                                                                                                                                                                                                                       |
| 10.2+  |   | 1993 Incentive Stock Option Plan and form of option agreement  thereunder (Incorporated herein by reference to Exhibit (3.2) to the  Registrant’s Annual Report on Form 10-K for the year ended January 1, 2000).                                                     |
|   |   |                                                                                                                                                                                                                                                                       |
| 10.3+  |   | 1993 Director Option Plan and form of subscription agreement  thereunder (Incorporated herein by reference to Exhibit (10.5) to the  Registrant’s Registration Statement on Form S-1 (Reg. No. 33-67374) declared  effective on September 23, 1993).                  |
|   |   |                                                                                                                                                                                                                                                                       |
| 10.4+  |   | 1993 Employee Stock Purchase Plan and form of subscription agreement  thereunder (Incorporated herein by reference to Exhibit (10.5) to the  Registrant’s Registration Statement on Form S-1 (Reg. No. 33-67374) declared  effective on September 23, 1993).          |
|   |   |                                                                                                                                                                                                                                                                       |
| 10.7+  |   | Executive Variable Compensation Plan (Incorporated herein by  reference to Exhibit A to the Registrant’s definitive Proxy Statement filed  with the Securities and Exchange Commission on April 19, 1999).                                                            |
|   |   |                                                                                                                                                                                                                                                                       |
| 10.8   |   | Agreement and Plan of Merger dated as of June 23, 2001, among Monaco  Coach Corporation, Salmon Acquisition, Inc., and SMC Corporation  (incorporated herein by reference to Monaco’s, Schedule 13D filed with the  Commission on July 3, 2001, Exhibit 99. (2) (b)). |

 

33

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| 10.9   |   | Credit Agreement dated September 28, 2001 with U.S. Bank National  Association (Incorporated herein by reference to Exhibit (10.1) to the  Registrant’s  quarterly report on Form  10-Q filed November 13, 2001). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                        |
| 11.1   |   | Computation of earnings per share (see Note 10 of Notes to Consolidated  Financial Statements included in Item 8 hereto).                                                                                                   |
|   |   |                                                                                                                                                                                                                        |
| 21.1   |   | Subsidiaries of Registrant. (Previously filed)                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                        |
| 23.1   |   | Consent of Independent Accountants. (Previously filed)                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                        |
| 24.1   |   | Power of Attorney (Previously filed)                                                                                                                                                                                        |

 

 

----

+                                                                                         The item listed is a compensatory plan.

 

 

 
| (b)    |   | REPORTS ON FORM 8-K.  No  reports on Form 8-K were filed by the Company |
|--------|--------|------------------------------------------------------------------------------|
|   |   | during the year ended December 29, 2001.                                     |

 

 

34

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this amendment to report to be signed onits behalf by the undersigned, thereunto duly authorized.

 
| November 12, 2002 | MONACO COACH CORPORATION |
|-------------------|--------------------------|
|              |                     |
|              | By:                      | /s/ P. Martin Daley |   |
|              |                     | P. Martin Daley |
|              |                     | Vice President and Chief |
|              |                     | Financial Officer |

 

35

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EXHIBIT INDEX

** **
| **Exhibit No.** |   | **Exhibit**                                                                                                                                                                                                                                                                |
|-----------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1             |   | Amended and Restated Certificate of Incorporation of the Registrant  (Incorporated herein by reference to Exhibit (3.1) to the Registrant’s Annual  Report on Form 10-K for the year ended January 1, 1994).                                                          |
|            |   |                                                                                                                                                                                                                                                                       |
| 3.2             |   | Certificate of  Amendment of Amended & Restated Certificate of Incorporation dated June  30, 1999 (Incorporated herein by reference to Exhibit (3.2) to the  Registrant’s Annual Report on Form 10-K for the year ended January 1, 2000).                         |
|            |   |                                                                                                                                                                                                                                                                       |
| 3.3             |   | Bylaws of Registrant, as amended to date (Incorporated herein by  reference to Exhibit (3.2) to the Registrant’s Annual Report on Form 10-K for  the year ended January 1, 1994).                                                                                     |
|            |   |                                                                                                                                                                                                                                                                       |
| 10.1            |   | Form of Indemnification Agreement for directors and executive  officers (Incorporated herein by reference to Exhibit (10.2) to the  Registrant’s Registration Statement on Form S-1 (Reg. No. 33-67374) declared  effective on September 23, 1993).                   |
|            |   |                                                                                                                                                                                                                                                                       |
| 10.2+           |   | 1993 Incentive Stock Option Plan and form of option agreement  thereunder (Incorporated herein by reference to Exhibit (3.2) to the  Registrant’s Annual Report on Form 10-K for the year ended January 1, 2000).                                                     |
|            |   |                                                                                                                                                                                                                                                                       |
| 10.3+           |   | 1993 Director Option Plan and form of subscription agreement  thereunder (Incorporated herein by reference to Exhibit (10.5) to the  Registrant’s Registration Statement on Form S-1 (Reg. No. 33-67374) declared  effective on September 23, 1993).                  |
|            |   |                                                                                                                                                                                                                                                                       |
| 10.4+           |   | 1993 Employee Stock Purchase Plan and form of subscription agreement  thereunder (Incorporated herein by reference to Exhibit (10.5) to the  Registrant’s Registration Statement on Form S-1 (Reg. No. 33-67374) declared  effective on September 23, 1993).          |
|            |   |                                                                                                                                                                                                                                                                       |
| 10.7+           |   | Executive Variable Compensation Plan (Incorporated herein by  reference to Exhibit A to the Registrant’s definitive Proxy Statement filed  with the Securities and Exchange Commission on April 19, 1999).                                                            |
|            |   |                                                                                                                                                                                                                                                                       |
| 10.8            |   | Agreement and Plan of Merger dated as of June 23, 2001, among Monaco  Coach Corporation, Salmon Acquisition, Inc., and SMC Corporation  (incorporated herein by reference to Monaco’s, Schedule 13D filed with the  Commission on July 3, 2001, Exhibit 99. (2) (b)). |
|            |   |                                                                                                                                                                                                                                                                       |
| 10.9            |   | Credit Agreement dated September 28, 2001 with U.S. Bank National  Association (Incorporated herein by reference to Exhibit (10.1) to the  Registrant’s  quarterly report on Form  10-Q filed November 13, 2001).                                                |
|            |   |                                                                                                                                                                                                                                                                       |
| 11.1            |   | Computation of earnings per share (see Note 10 of Notes to Consolidated  Financial Statements included in Item 8 hereto).                                                                                                                                                  |
|            |   |                                                                                                                                                                                                                                                                       |
| 21.1            |   | Subsidiaries of Registrant. (Previously filed)                                                                                                                                                                                                                             |
|            |   |                                                                                                                                                                                                                                                                       |
| 23.1            |   | Consent of Independent Accountants. (Previously filed)                                                                                                                                                                                                                     |
|            |   |                                                                                                                                                                                                                                                                       |
| 24.1            |   | Power of Attorney (Previously filed).                                                                                                                                                                                                                                      |

 

 

----

+        The item listed is a compensatory plan.

 

36

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