<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                                           
                            WASHINGTON, D.C. 20549
                                           
                                           
                                  FORM 10-Q
                                           
[ X ]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities 
       Exchange Act of 1934
                                           
For the period ended:  JUNE 28, 1997
                                    or
                                           
[   ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities 
       Exchange Act of 1934
                                           
For the period from __________________ to _____________
                                           
Commission File Number:  0-22256
                                           
                                        
                          MONACO COACH CORPORATION
                                           
                                 
        Delaware                                  35-1880244
(State of Incorporation)                       (I.R.S. Employer
                                              Identification  No.)
                                           
                        91320 Industrial Way 
                        Coburg, Oregon 97408
              (Address of principal executive offices)
                                           
      Registrant's telephone number, including area code (541) 686-8011 
                                           
   Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.
                                           
YES  X              NO
   -----              -----
                                           
   The number of shares outstanding of common stock, $.01 par value, as of 
June 28, 1997:  5,481,699
<PAGE>

                               MONACO COACH CORPORATION
                                           
                                     FORM 10-Q
                                           
                                  JUNE  28, 1997 
                                           
                                      INDEX
                                           
                                                                       PAGE
PART I - FINANCIAL INFORMATION                                       REFERENCE
                                                                     ----------
  ITEM 1.  FINANCIAL STATEMENTS.
                                           
    Condensed Consolidated Balance Sheets as of                           4
      December 28, 1996 and June 28, 1997.

    Condensed Consolidated Statements of Income                           5
      for the quarter ended June 29, 1996 and
      June 28, 1997 and for the six months ended
      June 29, 1996 and June 28, 1997. 

    Condensed Consolidated Statements of Cash                             6
      Flows for the six months ended June 29, 1996
      and June 28, 1997.

    Notes to Condensed Consolidated Financial Statements.               7 - 11

  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS.                      12 - 20

  ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 
             MARKET RISK.                                                20


PART II - OTHER INFORMATION

  ITEM 1.  LEGAL PROCEEDINGS.                                            21

  ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.                             21

  SIGNATURES                                                             22

<PAGE>

                                           
                           PART  I - FINANCIAL INFORMATION
                                           
                            ITEM 1.  FINANCIAL STATEMENTS
                                           
<PAGE>

                               MONACO COACH CORPORATION
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                          (UNAUDITED: DOLLARS IN THOUSANDS)
                                           
                                           

                                                 DECEMBER  28,        JUNE 28,
                                                     1996               1997
                                                 -------------        --------
ASSETS

Current assets:
  Trade receivables                               $  14,891           $  23,230
  Inventories                                        46,930              50,585
  Prepaid expenses                                    1,343                 965
  Deferred tax assets                                 8,278               8,978
  Notes receivable                                    1,064                 177
  Assets held for sale                                1,383                 908
                                                  ---------           ---------
    Total current assets                             73,889              84,843

Notes receivable                                        636               2,058

Debt issuance costs, net of accumulated 
  amortization of $343 and $549, respectively         1,760               1,565
Property, plant and equipment, net                   38,309              46,356
Goodwill, net of accumulated amortization of 
  $2,084 and $2,408, respectively                    20,774              20,849
                                                  ---------           ---------
    Total assets                                  $ 135,368           $ 155,671
                                                  ---------           ---------
                                                  ---------           ---------

LIABILITIES

Current liabilities:
  Book overdraft                                  $   2,455           $   2,892
  Short-term borrowings                               9,991               4,456
  Current portion of long-term note payable           2,000               2,500
  Accounts payable                                   24,218              31,524
  Accrued expenses and other liabilities             23,361              27,073
  Income taxes payable                                7,362               1,056
                                                  ---------           ---------
    Total current liabilities                        69,387              69,501

Deferred income                                         200                 200
Notes payable, less current portion                  16,500              15,250
Deferred tax liability                                2,787               3,180
                                                  ---------           ---------
                                                     88,874              88,131
                                                  ---------           ---------

Redeemable convertible preferred stock,
  redemption value of $3,005                          2,687
                                                  ---------           ---------

Commitments and contingencies (Note 10)

STOCKHOLDERS' EQUITY

Common stock, $.01 par value; 20,000,000 shares
  authorized, 5,481,699 shares (4,430,467 shares
  at December 28, 1996) issued and outstanding           44                  55
Additional paid-in capital                           25,430              44,000
Retained earnings                                    18,333              23,485
                                                  ---------           ---------
    Total stockholders' equity                       43,807              67,540
                                                  ---------           ---------
    Total liabilities and stockholders' equity    $ 135,368           $ 155,671
                                                  ---------           ---------
                                                  ---------           ---------


See accompanying notes.


                                                                            4
<PAGE>

                               MONACO COACH CORPORATION
                      CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               (UNAUDITED: DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                        QUARTER ENDED             SIX MONTHS ENDED
                                                  ------------------------    ------------------------
                                                   JUNE 29,      JUNE 28,      JUNE 29,      JUNE 28,
                                                     1996          1997          1996         1997 
                                                  ----------    ----------    ----------    ----------
<S>                                               <C>           <C>           <C>           <C>
Net sales                                         $  106,729    $  105,981    $  168,694    $  215,005
Cost of sales                                         94,321        91,652       149,558       185,630
                                                  ----------    ----------    ----------    ----------

   Gross profit                                       12,408        14,329        19,136        29,375

Selling, general and administrative expenses           9,277         8,811        13,927        18,292
Management fees                                           18            18            36            36
Amortization of goodwill                                 179           159           309           319
                                                  ----------    ----------    ----------    ----------

   Operating income                                    2,934         5,341         4,864        10,728

Other expense (income), net                               11           (58)            3           (97)
Interest expense                                       1,362           585         2,226         1,408
                                                  ----------    ----------    ----------    ----------

   Income before income taxes                          1,561         4,814         2,635         9,417

Provision for income taxes                               670         1,998         1,110         3,907
                                                  ----------    ----------    ----------    ----------

   Net income                                            891         2,816         1,525         5,510

Preferred stock dividends                                (38)          (18)          (50)          (41)
Accretion of redeemable preferred stock                  (25)         (292)          (33)         (317)
                                                  ----------    ----------    ----------    ----------
   Net income attributable to
     common stock                                 $      828    $    2,506    $    1,442    $    5,152
                                                  ----------    ----------    ----------    ----------
                                                  ----------    ----------    ----------    ----------

Earnings per common share:
   Primary                                              $.19          $.54          $.32         $1.12
   Fully diluted (see note 7)                           $.19          $.58          $.33         $1.14

Weighted average common shares outstanding:
   Primary                                         4,472,357     4,661,323     4,469,130     4,588,769
   Fully diluted                                   4,703,043     4,882,348     4,621,549     4,828,931
</TABLE>


See accompanying notes.


                                                                             5
<PAGE>

                               MONACO COACH CORPORATION
                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (UNAUDITED: DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED
                                                                         ---------------------
                                                                         JUNE 29,     JUNE 28,
                                                                           1996         1997
                                                                         --------     --------
<S>                                                                      <C>          <C>
INCREASE (DECREASE) IN CASH:

Cash flows from operating activities:
  Net income                                                             $  1,525     $    5,510
  Adjustments to reconcile net income to net cash
    generated (used) by operating activities:
      Depreciation and amortization                                         1,489         1,566
      Deferred income taxes                                                   168          (307)
      Changes in working capital accounts, net of effect
        of business acquisition and sale of retail stores:
          Trade receivables                                                (4,457)       (8,323)
          Inventories                                                      13,659        (5,947)
          Prepaid expenses                                                   (342)          378
          Accounts payable                                                    873         7,306
          Accrued expenses and other current liabilities                    3,305         3,502
          Income taxes payable                                               (128)       (6,306)
                                                                         --------     ---------

             Net cash provided by (used in) operating activities           16,092        (2,621)
                                                                         --------     ---------
Cash flows from investing activities:
  Additions to property, plant and equipment                                 (726)       (9,105)
  Payment for business acquisition (see note 2)                           (23,177)
  Proceeds from sale of retail stores, collections on notes
    receivable, net of closing costs                                        3,213           241
                                                                         --------     ---------

             Net cash used in investing activities                        (20,690)       (8,864)
                                                                         --------     ---------

Cash flows from financing activities:
  Book overdraft                                                             (516)          437
  Payments on lines of credit, net                                         (3,968)       (3,789)
  Payments on subordinated note                                            (1,277)
  Advances (payments) on floor financing, net                               1,089          (194)
  Borrowings on long-term notes payable                                    20,000
  Debt issuance costs                                                      (2,024)
  Payments on long-term notes payable                                      (7,000)         (750)
  Issuance of common stock                                                               16,181
  Cost to issue shares of common stock                                                     (390)
  Other                                                                        42           (10)
                                                                         --------     ---------

             Net cash provided by financing activities                      6,346        11,485
                                                                         --------     ---------

Net increase in cash                                                        1,748             0
Cash at beginning of period                                                     0             0
                                                                         --------     ---------

Cash at end of period                                                    $  1,748     $       0
                                                                         --------     ---------
                                                                         --------     ---------

SUPPLEMENTAL DISCLOSURE

  Amount of capitalized interest                                         $    136     $     387
  Conversion of preferred stock to common stock                                           3,000
</TABLE>


See accompanying notes.


                                                                              6
<PAGE>

                         MONACO COACH CORPORATION
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               (UNAUDITED)

1.  BASIS OF PRESENTATION

    The interim condensed consolidated financial statements have been 
    prepared by Monaco Coach Corporation (the "Company") without audit.  In 
    the opinion of management, the accompanying unaudited financial 
    statements contain all adjustments necessary, consisting only of normal 
    recurring adjustments, to present fairly the financial position of the 
    Company as of December 28, 1996 and June 28, 1997, and the results of 
    operations for the quarters and six-month periods ended June 29, 1996 and 
    June 28, 1997, and cash flows of the Company for the six-month periods 
    ended June 29, 1996 and June 28, 1997.  The condensed consolidated 
    financial statements include the accounts of the Company and its 
    wholly-owned subsidiary, and all significant intercompany accounts and 
    transactions have been eliminated in consolidation.  The balance sheet 
    data as of December 28, 1996 was derived from audited financial 
    statements, but do not include all disclosures contained in the Company's 
    Annual Report to Stockholders.  These interim condensed consolidated 
    financial statements should be read in conjunction with the audited 
    financial statements and notes thereto appearing in the Company's Annual 
    Report to Stockholders for the year ended December 28, 1996.

2.  HOLIDAY ACQUISITION

    On March 4, 1996, the Company acquired certain assets of the Holiday 
    Rambler LLC Recreational Vehicle Manufacturing Division ("Holiday 
    Rambler") and ten retail dealerships ("Holiday World") from an affiliate 
    of Harley-Davidson, Inc. ("Harley-Davidson").  The acquisition (the 
    "Holiday Acquisition") was accounted for as a purchase.

    The purchase price for Holiday Rambler and Holiday World was comprised of:

                                                          (IN THOUSANDS)
        Cash, including transaction costs of $2,131,
           net of $836 received from Harley-Davidson        $   24,645
        Preferred stock                                          2,599
        Subordinated debt                                       12,000
                                                            ----------
                                                            $   39,244
                                                            ----------
                                                            ----------

The purchase price was allocated to the assets acquired based on estimated fair
values at March 4, 1996, as follows:               

                                                          (IN THOUSANDS)

        Receivables                                         $    9,536
        Inventories                                             61,269
        Property and equipment                                  11,592
        Prepaids and other assets                                   86
        Assets held for sale                                     7,100
        Goodwill                                                 2,560
        Notes payable                                          (21,784)
        Accounts payable                                       (16,851)
        Accrued liabilities                                    (14,264)
                                                           -----------
                                                           $    39,244
                                                           -----------
                                                           -----------

The allocation of the purchase price and the related goodwill was subject to 
adjustment upon resolution of pre-Holiday Acquisition contingencies.  The 
effects of resolution of pre-Holiday Acquisition  contingencies occurring: (i)
within one year of the acquisition date were reflected as an adjustment of 
the allocation of the purchase price and of goodwill, and (ii) after one year 
will be recognized in the determination of net income.

                                                                             7
<PAGE>


                         MONACO COACH CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
                               (UNAUDITED)


2.  HOLIDAY ACQUISITION (CONTINUED)

    The ten acquired Holiday World retail store properties were classified as 
    "assets held for sale".  Seven of the stores were sold during 1996 at a 
    gain of $1,402,000, which has been reflected as an adjustment of 
    goodwill.  One store was sold during the first quarter of 1997 at a loss 
    of $399,000, which also has adjusted goodwill.  The remaining two stores 
    are still held for sale.  The Company's results of operations and cash 
    flows include Holiday World since March 4, 1996, as the operating 
    activities of Holiday World are not clearly distinguishable from other 
    continuing operations. Net sales of Holiday World stores subsequent to 
    the purchase and included in the six months ended June 29, 1996 and June 
    28, 1997 were $16.3 million and $4.5 million, respectively.  

    The following unaudited pro forma information presents the consolidated 
    results as if the Holiday Acquisition had occurred at the beginning of 
    1996 and giving effect to the adjustments for the related interest on 
    financing the purchase price, goodwill and depreciation.  The pro forma 
    information does not necessarily reflect actual results that would have 
    occurred nor is it necessarily indicative of future operating results.

                                          (IN THOUSANDS, EXCEPT PER SHARE 
                                                       AMOUNTS)
                                                  SIX MONTHS ENDED
                                                      JUNE 29,
                                                        1996
                                                  -----------------
         Net sales                                $        222,495
         Net loss                                              158
         Loss per common share                                0.03


3.  INVENTORIES

    Inventories are stated at lower of cost (first-in, first-out) or 
    market.  The composition of inventory is as follows:

                                                  (IN THOUSANDS)
                                            DECEMBER 28,      JUNE 28,
                                               1996             1997
                                            ------------    -----------
        Raw materials                       $     16,844    $    20,354
        Work-in-process                           17,592         18,977
        Finished units                             3,998          5,686
        Holiday World retail inventory             8,496          5,568
                                            ------------    -----------
                                            $     46,930    $    50,585
                                            ------------    -----------
                                            ------------    -----------

4.  GOODWILL

    Goodwill represents the excess of the cost of acquisition over the fair 
    value of net assets acquired.  The goodwill arising from the acquisition 
    of the assets and operations of the Company's Predecessor in March 1993 
    is being amortized on a straight-line basis over 40 years and, at June 
    28, 1997, the unamortized amount was $18.4 million.  The goodwill arising 
    from the Holiday Acquisition is being amortized on a straight-line basis 
    over 20 years; at June 28, 1997 the unamortized amount was $2.4 million.  
    Management assesses whether there has been permanent impairment in the 
    value of goodwill and the amount of such impairment by comparing 
    anticipated undiscounted future cash flows from operating activities with 
    the carrying value of the goodwill.  The factors considered by 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.

                                                                            8

<PAGE>

                         MONACO COACH CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
                               (UNAUDITED)


5.  SHORT-TERM BORROWINGS

    In connection with the Holiday Acquisition, the Company replaced its bank 
    line of credit with  new credit facilities consisting, in part, of a 
    revolving line of credit of up to $45,000,000, with interest payable 
    monthly at varying rates based on the Company's interest coverage ratio 
    and interest payable monthly on the unused available portion of the line 
    at 0.5%.  There were no outstanding borrowings at June 28, 1997.  The 
    revolving line of credit expires March 1, 2001 and is collateralized by 
    all the assets of the Company.  The Holiday World subsidiary has various 
    loans outstanding to finance retail inventory at the dealerships which 
    amounted to approximately $4,456,000 at June 28, 1997, which bear 
    interest at various rates based on the prime rate and are collateralized 
    by the assets of the subsidiary.

6.  LONG-TERM BORROWINGS

    The Company has a term loan of $17,750,000 outstanding as of June 28, 
    1997 which was obtained in connection with the Holiday Acquisition.  The 
    term loan bears interest at various rates based on the Company's interest 
    coverage ratio, and expires on March 1, 2001.  The term loan requires 
    monthly interest payments, quarterly principal payments and certain 
    mandatory prepayments, and is collateralized by all the assets of the 
    Company.

7.  EARNINGS PER COMMON SHARE

    Earnings per share is based on the weighted average number of shares 
    outstanding during the period after consideration of the dilutive effect 
    of stock options and convertible preferred stock.  Common shares issued 
    and options granted by the Company are considered outstanding for the 
    period presented, using the treasury stock method. The weighted average 
    number of common shares used in the computation of earnings per common 
    share are as follows:         

<TABLE>
<CAPTION>
                                                                  SIX MONTHS ENDED
                                               ------------------------------------------------------------
                                                           JUNE 29,                      JUNE 28,
                                                            1996                          1997
                                               -----------------------------   ----------------------------
                                                 Primary      Fully Diluted      Primary      Fully Diluted
                                               -----------    --------------   ------------   -------------
<S>                                            <C>            <C>              <C>            <C>
  Issued and outstanding (weighted average)     4,416,751        4,416,751       4,501,921      4,501,921
  Stock options                                    52,379           56,473          86,848        110,140
  Convertible preferred stock                                      148,325                        216,870
                                               -----------    --------------   ------------   -------------
                                                4,469,130        4,621,549       4,588,769      4,828,931
                                               -----------    --------------   ------------   -------------
                                               -----------    --------------   ------------   -------------
</TABLE>

    Fully diluted earnings per share for the quarter and year to date ended 
    June 28, 1997 were greater than primary earnings per share by $.04 and 
    $.02 per share respectively.  The antidilutive effect was caused 
    principally by the conversion of all shares of preferred stock to shares 
    of common stock during the second quarter, which required all remaining 
    accretion related to preferred stock share to be charged against retained 
    earnings.

                                                                            9
<PAGE>

                         MONACO COACH CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
                               (UNAUDITED)

8.  NEW ACCOUNTING PRONOUNCEMENTS

    In February 1997, the Financial Accounting Standards Board issued 
    Statement of Financial Accounting Standard No. 128, "Earnings Per Share", 
    which is required to be adopted for periods ending after December 15, 
    1997.  The following table presents unaudited pro forma earnings per 
    share, calculated in accordance with the provisions of this new standard:

                          QUARTER ENDED                SIX MONTHS ENDED
                   ----------------------------------------------------------
                   JUNE 29, 1996  JUNE 28, 1997  JUNE 29, 1996  JUNE 28, 1997
                   -------------  -------------  -------------  -------------
       Basic           $.19            $.55           $.32          $1.14
       Diluted         $.19            $.55           $.32          $1.14

    In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS 
    No. 130, Reporting of Comprehensive Income, which establishes standards 
    for reporting and display of comprehensive income and its components of 
    revenues, expenses, gains, and losses.

    In June of 1997, the FASB also issued SFAS No. 131, Disclosures about 
    Segments of an Enterprise and Related Information.  This statement 
    establishes standards for reporting information about operating segments.
                                           
    Both SFAS No. 130 Reporting of Comprehensive Income, and SFAS No. 131 
    Disclosures about Segments of an Enterprise and Related Information, are 
    effective for periods beginning after December 15, 1997.  The Company 
    will be adopting the requirements of these statements in the first 
    quarter of 1998.


9.  COMMITMENTS AND CONTINGENCIES
                                           
    REPURCHASE AGREEMENTS
                                           
    Substantially all of the Company's sales to independent dealers are made 
    on terms requiring cash on delivery.  The Company does not finance dealer 
    purchases.  However, most dealers are financed on a "floor plan" basis by 
    a bank or finance company which lends the dealer all or substantially all 
    of the wholesale purchase price and retains a security interest in the 
    vehicles.  Upon request of a lending institution financing a dealer's 
    purchases of the Company's product, the Company will execute a repurchase 
    agreement.  These agreements provide that, for up to 18 months after a 
    unit is shipped, the Company will repurchase a dealer's inventory in the 
    event of default by a dealer to its lender.
                                       
    The Company's liability under repurchase agreements is limited to the 
    unpaid balance owed to the lending institution by reason of its extending 
    credit to the dealer to purchase its vehicles.  The Company does not 
    anticipate any significant losses will be incurred under these agreements 
    in the foreseeable future.
                                       
    LITIGATION
                                       
    The Company is involved in legal proceedings arising in the ordinary 
    course of its business, including a variety of product liability and 
    warranty claims typical in the recreational vehicle industry.  In 
    addition, in connection with the Holiday Acquisition, the Company assumed 
    most of the liabilities of that business, including product liability and 
    warranty claims.  The Company does not believe that the outcome of its 
    pending legal proceedings will have a material adverse effect on the 
    business, financial condition, or results of operations of the Company.
                                       
    OTHER COMMITMENTS
                                       
    In 1996, the Company began construction of the manufacturing facility in 
    Wakarusa, Indiana.  The main plant was operational at the end of second 
    quarter 1997 and the offices are expected to be completed in third 
    quarter 1997 at a total estimated cost of approximately $15 million.  At 
    June 28, 1997, the Company had incurred approximately $11.8 million in 
    expenditures related to construction in progress on the facility.
                                           
10. SUBSEQUENT EVENT
                                           
    Subsequent to June 28, 1997, the Company suffered a fire in one of the 
    buildings at its manufacturing facilities in Coburg, Oregon.  The plant 
    itself was not significantly damaged and normal operations resumed the 
    following week. The Company believes it has adequate insurance coverage 
    for the loss.
                                           

                                                                           10

<PAGE>

                         MONACO COACH CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
                               (UNAUDITED)

11. STOCK OFFERING

    On June 17, 1997, the Company completed a secondary public offering of 
    800,000 new shares of its common stock.  In connection with the offering, 
    65,217 shares of preferred stock were converted to 230,767 shares of 
    common stock.  The net proceeds of $15.4 million were used to reduce 
    amounts outstanding under short-term borrowings with the remainder being 
    added to working capital.
                                           
                                           
                                                                           11
<PAGE>

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                              AND RESULTS OF OPERATIONS
                                           
                                           
This Quarterly Report on Form 10-Q contains forward-looking statements within 
the meaning of Section 21E of the Securities Exchange Act of 1934, as 
amended, including statements that include the words "believes", "expects", 
"anticipates" or similar expressions.  Such forward-looking statements 
involve known and unknown risks, uncertainties and other factors that may 
cause actual results, performance or achievements of the Company to differ 
materially from those expressed or implied by such forward-looking 
statements.  Such factors include, among others, the factors discussed below 
under the caption "Factors That May Affect Future Operating Results" and 
elsewhere in this Quarterly Report on Form 10-Q.  The reader should carefully 
consider, together with the other matters referred to herein, the factors set 
forth under the caption "Factors That May Affect Future Operating Results".  
The Company cautions the reader, however, that these factors may not be 
exhaustive.
                                           
                                           
GENERAL
                                           
Monaco Coach Corporation is a leading manufacturer of premium Class A motor 
coaches and towable recreational vehicles ("towables").  The Company's 
product line currently consists of ten models of motor coaches and seven 
models of fifth wheel trailers and travel trailers under the "Monaco", 
"Holiday Rambler", and "McKenzie Towables" brand names.  The Company's 
products, which are typically priced at the high end of their respective 
product categories, range in suggested retail price from $60,000 to $750,000 
for motor coaches and from $15,000 to $70,000 for towables.
                                           
Prior to March 1996, the Company's product line consisted exclusively of 
High-Line Class A motor coaches (units with retail prices above $120,000).  
On March 4, 1996, the Company acquired Holiday Rambler, a manufacturer of a 
full line of Class A motor coaches and towables.  The Holiday Acquisition 
more than doubled the Company's net sales, significantly broadened the range 
of products the Company offered (including the Company's first offerings of 
towables and entry-level to midrange motor coaches) and significantly lowered 
the price threshold for first-time buyers of the Company's products, making 
them affordable for a significantly larger base of potential customers.
                                           
The acquired operations were incorporated into the Company's consolidated 
financial statements from March 4, 1996.  Therefore, the Company's 
consolidated financial statements for the first half of 1996  include only 
four months of Holiday Rambler operations while the first half of 1997 
includes a full six months of Holiday Rambler results.  Both 1996 and 1997 
results contain expenses related to the Holiday Acquisition, primarily 
interest expense, and the amortization of debt issuance costs and of Holiday 
Acquisition goodwill.
                                           
                                           
RESULTS OF OPERATIONS
                                           
QUARTER ENDED JUNE 28, 1997 COMPARED TO QUARTER ENDED JUNE 29, 1996
                                           
Net sales for the second quarter of 1997 were basically even with the same 
period in 1996 at $106.0 million versus $106.7 million. However, 1996 sales 
included $11.3 million of previously-owned or non-Holiday Rambler unit sales 
at the Holiday World retail dealerships versus only $2.6 million in 1997 due 
to the  sale of 8 of the 10 Holiday World retail stores subsequent to June 
29, 1996.  Excluding the sales of the previously-owned or non-Holiday Rambler 
products at the retail dealerships, net sales in the second quarter of 1997 
would have been up 8.3%.  The Company's overall unit sales were up 3.3% in 
the second quarter of 1997 (excluding 75 units in 1997 and 391 units in 1996 
that were sold by the Company's Holiday World retail dealerships that were 
either previously-owned or non-Holiday Rambler units).  On a wholesale basis 
sales were up 9.4%, with motorized products up 10.9% and towable products 
level with those in the prior period.  The Company's average unit selling 
price increased to $74,000 in the second quarter of 1997 from $69,000 in the 
second quarter of 1996 primarily due to the strong performance on the 
motorized side of the Company's product offering.  Due to the inclusion of 
Holiday Rambler's generally lower priced products in the sales mix, the 
Company expects its overall average selling price to remain less than 
$100,000.

                                                                           12
<PAGE>

Gross profit for the second quarter of 1997 increased to $14.3 million, up 
$1.9 million from $12.4 million in 1996, and gross margin increased to 13.5% 
in 1997 from 11.6% in 1996.  Gross margin in the second quarter of 1996 was 
limited by a $1.1 million increase in cost of sales resulting from an 
inventory write-up to fair value arising from the Holiday Acquisition.  
Without this charge, gross margin in the second quarter of 1996 would have 
been 12.7% of sales.  Gross margin in the second quarter of 1997 was dampened 
slightly by costs associated with the startup of the Springfield, Oregon 
towables plant and costs related to model changeovers in all of the other 
plants. Excluding the expenses relating to the startup in Springfield, 
Oregon, gross margin would have been 13.7% in the second quarter of 1997.  
The Company's overall gross margin may fluctuate in future periods if the mix 
of products shifts from higher to lower gross margin units or if the Company 
encounters unexpected manufacturing difficulties or competitive pressures.   
                                           
Selling, general, and administrative expenses decreased by $466,000 to $8.8 
million in the second quarter of 1997 and decreased as a percentage of sales 
from 8.7% in 1996 to 8.3% in 1997.  The decrease in selling, general, and 
administrative expenses as a percentage of sales was primarily due to having 
only two Holiday World stores included in the operating results in the second 
quarter of 1997, compared to ten in the second quarter of 1996.  The Holiday 
World stores spent more on selling, general, and administrative expenses, on 
a percentage basis, than the manufacturing operations in both periods.  The 
Company has reduced and plans to continue lowering the level of spending by 
the Holiday Rambler division for selling, general, and administrative 
expenses as a percentage of net sales, which have historically been higher 
than the Company's Monaco Coach operations.  However, the Company's overall 
selling, general, and administrative expenses as a percentage of net sales is 
expected to remain higher than the level prior to the Holiday Acquisition.
                                           
Amortization of goodwill was $159,000 in the second quarter of 1997 compared 
to $179,000 in the same period of 1996.  At June 28, 1997, goodwill, net of 
accumulated amortization was $20.8 million.
                                           
Operating  income was $5.3 million in the second quarter of 1997, a $2.4 
million increase over the $2.9 million in 1996.  The improvement in the 
Company's gross margin combined with the decrease in selling, general, and 
administrative expense as a percentage of sales, resulted in an increase in 
operating margin from 2.7% in the second quarter of 1996 to 5.0% in 1997.  
The Company's operating margin in the second quarter of 1996 was adversely 
affected by a $1.1 million expense related to an inventory write-up to fair 
value as a result of the Holiday Acquisition.  Without that charge, the 
Company's operating margin in the second quarter of 1996 would have been 3.8%.
                                           
Net interest expense was $585,000 in the second quarter of 1997 compared to 
$1.4 million in the comparable 1996 period.  The Company capitalized $241,000 
of interest expense in the second quarter of 1997 relating to the 
construction in progress for a new motorized manufacturing facility in 
Wakarusa, Indiana, and capitalized $102,000 of interest in the second quarter 
of 1996 stemming from the acquisition of the Holiday World retail stores held 
for resale.  The Company's interest expense included $96,000 in the second 
quarter of 1997 and $414,000 in the second quarter of 1996 relating to floor 
plan financing at the retail stores.  Additionally, 1997 second quarter 
interest expense included $103,000 related to the amortization of $2.1 
million in debt issuance costs recorded in conjunction with the Holiday 
Acquisition. These costs are being written off over a five-year period.
                                           
The Company reported a provision for income taxes of $2.0 million, or an 
effective tax rate of 41.5% in the second quarter of 1997, compared to 
$670,000, or an effective tax rate of 42.9% for the comparable 1996 period.
                                           
Net income increased by $1.9 million from $891,000 in the second quarter of 
1996 to $2.8 million in the same period of 1997 due to the increase in 
operating margin and the reduction of interest expense.
                                           
                                           
SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 29, 1996
                                           
Net sales increased $46.3 million, or 27.5% for the first six months of 1997, 
compared to the year earlier period.  The increase was primarily due to the 
addition of the sales of Holiday Rambler for a full six months in 1997 versus 
four months in 1996.  Overall unit sales increased to 2918 units in the first 
half of 1997 compared to 2022 in 1996 (excluding 173 units in 1997 and 584 
units in 1996 that were sold at the Holiday World retail dealerships that 
were either previously-owned or not Holiday Rambler units).  On a pro forma 
basis, assuming the Company had acquired Holiday Rambler at the beginning of 
1996, wholesale sales for the first six months of 1997 would have been up 

                                                                           13
<PAGE>

8.3%, with motorized products  up 7.4% and towables up 13.4% over the 
comparable 1996 period.  The Company's overall average unit selling price was 
$72,900  compared to $76,400 in the year earlier period.     

Gross profit for the six-month period ended June 28, 1997 was up $10.2 
million to $29.4 million and gross margin increased to 13.7% in 1997 from 
11.3% in 1996.  Gross margin for the first six months of 1996 was negatively 
affected by a $1.75 million increase in cost of sales resulting from an 
inventory write-up to fair value arising from the Holiday Acquisition.  
Without this charge, gross margin in the first six months of 1996 would have 
been 12.4%.  Also contributing to the lower gross margin in 1996 were lower 
than expected gross margins at the Company's Elkhart, Indiana facility due to 
reduced production volumes and a higher than expected mix of lower margin 
Windsor models.   

Selling, general, and administrative expenses increased $4.4 million to $18.3 
million in the first six months of 1997 and increased slightly as a 
percentage of sales to 8.5% in 1997 from 8.3% in the year earlier period.  
The increase in selling, general, and administrative expenses as a percentage 
of sales was primarily due to the inclusion of Holiday Rambler results for a 
full six months in 1997 versus only four months in 1996.  Historically, 
Holiday Rambler has spent more for selling, general, and administrative 
expenses as a percentage of sales than the Company's Monaco Coach operations. 
The Company has reduced and plans to continue lowering the level of spending 
by Holiday Rambler as a percentage of net sales.  However, the Company's 
overall selling, general, and administrative expenses as a percentage of net 
sales is expected to remain higher than the level prior to the Holiday 
Acquisition. 
                                           
Amortization of goodwill was $319,000 for the six-month period ended June 28, 
1997 versus $309,000 in the year earlier period.  
                                           
Operating income was $10.7 million for the first six months of 1997, a $5.9 
million increase over the comparable 1996 period.  The Company's higher gross 
margin coupled with the relatively small increase in selling, general, and 
administrative expense as a percentage of net sales, resulted in an 
improvement in operating margin in 1997 to 5.0% compared to 2.9% in 1996.  
Results for the first six months of 1996 included a $1.75 million expense 
related to an inventory write-up to fair value as a result of the Holiday 
Acquisition. Excluding that charge, operating margin for the first six months 
of 1996 would have been 3.9% of net sales.  
                                           
Net interest expense declined in the first six months of 1997 to $1.4 million 
from $2.2 million in the comparable 1996 period.  The Company capitalized 
$387,000 of interest expense in the first six months of 1997 as a result of 
the construction in progress for a new motorized manufacturing facility in 
Wakarusa, Indiana and $136,000 in the first six months of 1996 primarily 
related to the Holiday World retail stores held for resale.  The Company's 
interest expense included $249,000 in the first six months of 1997 and 
$623,000 in the first six months of 1996 related to floor plan financing at 
the retail stores.  Additionally, interest expense for the first half of 1997 
included $206,000 related to the amortization of $2.1 million in debt 
issuance costs recorded in conjunction with the Holiday Acquisition.  These 
costs are being written off over a five-year period.
                                           
The Company reported a provision for income taxes of $3.9 million, or an 
effective tax rate of 41.5% for the first six months of 1997 versus $1.1 
million, or 42.1% in the comparable 1996 period.
                                           
Net income increased to $5.5 million in the first six months of 1997 from 
$1.5 million in the first six months of 1996, primarily due to the increase 
in net sales combined with an improvement in operating margin and a decrease 
in net interest expense.       
   
LIQUIDITY AND CAPITAL RESOURCES
                                           
The Company's primary sources of liquidity are internally generated cash from 
operations and available borrowings under its credit facilities.  During the 
first six months of 1997, the Company had a cash outflow of $2.6 million from 
operating activities.  The Company used cash due to an abnormally large 
increase in trade receivables, arising primarily from a trade show the first 
week of July, a decrease in income taxes payable and an increase in inventory 
related to model changeover and the startup of a new manufacturing facility 
in Springfield, Oregon.  Combined, these more than offset the $7.1 million 
generated from net income and non-cash expenses such as depreciation and 
amortization, as well as increases in accounts payable and accrued expenses.  
The increase in trade receivables was temporary and the Company's trade 
receivable balance has since returned to a more normal level.


                                                                           14
<PAGE>

The Company has credit facilities consisting of a term loan of $20.0 million 
(the "Term Loan") and a revolving line of credit of up to $45.0 million ( the 
"Revolving Loans").  The Term Loan bears interest at various rates based upon 
the prime lending rate announced from time to time  by Banker's Trust Company 
(the "Prime Rate") or LIBOR and is due and payable in full on March 1, 2001.  
The Term Loan requires monthly interest payments, quarterly principal 
payments and certain mandatory prepayments.  The mandatory prepayments 
consist of: (i) an annual payment on April 30 of each year, beginning April 
30, 1997 of seventy-five percent (75%) of the Company's defined excess cash 
flow for the then most recently ended fiscal year (no defined excess cash 
flow existed for the year ended December 28, 1996); and (ii) a payment within 
two days of the sale of any Holiday World dealership, of the net cash 
proceeds received by the Company from such sale.  At the election of the 
Company, the Revolving Loans bear interest at variable interest rates based 
on the Prime Rate or LIBOR.  At June 28, 1997, the effective interest rate on 
the Term Loan was 8.59%.  The Revolving Loans are due and payable in full on 
March 1, 2001, and require monthly interest payments.  As of June 28, 1997, 
$17.75 million was outstanding under the Term Loan and no amount was 
outstanding under the Revolving Loans.  The Term Loan and the Revolving Loans 
are collateralized by a security interest in all of the assets of the Company 
and include various restrictions and financial covenants.  The Company also 
has various loans outstanding to finance retail inventory at the two 
remaining Holiday World dealerships which amounted to $4.5 million at June 
28, 1997 and which bear interest at various rates based on the prime rate and 
are collateralized by the assets of the Company.
                                           
The Company's principal working capital requirements are for purchases of 
inventory and, to a lesser extent, financing of trade receivables.  The 
Company's dealers typically finance product purchases under wholesale floor 
plan arrangements with third parties as described below.  At June 28, 1997, 
the Company had working capital of approximately $15.3 million, an increase 
of $10.8 million from working capital of $4.5 million at December 28, 1996.  
The Company completed a public offering of a total of 1,955,000 shares of its 
Common Stock in June 1997 at $21.25 per share, of which 800,000 shares were 
sold by the Company.  The approximately $15.4 million of net proceeds to the 
Company from this offering were used to pay off the outstanding balance under 
its revolving line of credit with the remainder being added to working 
capital.  The Company had been using short-term credit facilities and cash 
flow to finance construction of the new motorized manufacturing facility in 
Wakarusa, Indiana.  The Company primarily used long-term debt and redeemable 
preferred stock to finance the Holiday Acquisition.
                                           
The Company's capital expenditures were $9.1 million in the first six months 
of 1997, primarily for the Wakarusa, Indiana manufacturing facility.  This 
facility, approximately doubled the Company's production capacity of motor 
coaches.  The total cost of the Wakarusa facility, including the main plant 
and offices, is estimated to be approximately $15.0 million, and the main 
plant was operational at the end of the second quarter of 1997 and the 
offices are expected to be completed in the third quarter of 1997.  The 
Company recently decided to start construction of a new paint facility and 
finish area adjacent to the new Wakarusa facility.  It is expected that the 
new paint facility will cost between $7 million to $8 million and will be 
operational by the end of the first quarter of 1998.
                                           
The Company believes that cash flow from operations and funds available under 
its credit facilities will be sufficient to meet the Company's liquidity 
requirements for the next 12 months.  The Company anticipates that capital 
expenditures for all of 1997 will total approximately $17.0 to $20.0 million, 
of which an estimated $10.0 million will have been spent on the new Wakarusa 
facility, $4 million will be used to start construction of the paint 
facility, $520,000 was used to set up the new towable manufacturing facility 
in Springfield, Oregon, and up to $2.0 million will be used to upgrade the 
Company's management information systems, including software to handle the 
"Year 2000" issue.  The Company may require additional equity or debt 
financing to address working capital and facilities expansion needs, 
particularly if the Company further expands its operations to address greater 
than anticipated growth in the market for its products.  The Company may also 
from time to time seek to acquire businesses that would complement the 
Company's current business, and any such acquisition could require additional 
financing.  There can be no assurance that additional financing will be 
available if required or on terms deemed favorable by the Company.
                                           
As is typical in the recreational vehicle industry, many of the Company's 
retail dealers, including the Holiday World dealerships, utilize wholesale 
floor plan financing arrangements with third-party lending institutions to 
finance their purchases of the Company's products.  Under the terms of these 
floor plan arrangements, institutional lenders customarily require the 
recreational vehicle manufacturer to agree to repurchase any unsold units if 
the dealer fails to meet its commitments to the lender, subject to certain 
conditions.  The Company has agreements with several 

                                                                           15
<PAGE>

institutional lenders under which the Company currently has repurchase 
obligations.  The Company's contingent obligations under these repurchase 
agreements are reduced by the proceeds received upon the sale of any 
repurchased units.  The Company's obligations under these repurchase 
agreements vary from period to period. At June 28, 1997, approximately $129.3 
million of products sold by the Company to independent dealers were subject 
to potential repurchase under existing floor plan financing agreements with 
approximately 10.2% concentrated with one dealer.  If the Company were 
obligated to repurchase a significant number of units under any repurchase 
agreement, its business, operating results and financial condition could be 
adversely affected.
                                           
                                           
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
                                           
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS.  The Company's net sales, gross 
margin and operating results may fluctuate significantly from period to 
period due to factors such as the mix of products sold,  the ability to 
utilize and expand manufacturing resources efficiently, the introduction and 
consumer acceptance of new models offered by the Company, competition, the 
addition or loss of dealers, the timing of trade shows and rallies, and 
factors affecting the recreational vehicle industry as a whole.  In addition, 
the Company's overall gross margin on its products may decline in future 
periods to the extent the Company increases its sales of lower gross margin 
towable products or if the mix of motor coaches shifts to lower gross margin 
units.  Due to the relatively high selling prices of the Company's products 
(in particular, its High-Line Class A motor coaches), a relatively small 
variation in the number of recreational vehicles sold in any quarter can have 
a significant effect on sales and operating results for that quarter.  Demand 
in the overall recreational vehicle industry generally declines during the 
winter months, while sales and revenues are generally higher during the 
spring and summer months.  With the broader range of recreational vehicles 
now offered by the Company as a result of the Holiday Acquisition, seasonal 
factors could have a significant impact on the Company's operating results in 
the future.  In addition, unusually severe weather conditions in certain 
markets could delay the timing of shipments from one quarter to another.
                                           
CYCLICALITY.  The recreational vehicle industry has been characterized by 
cycles of growth and contraction in consumer demand, reflecting prevailing 
economic, demographic and political conditions that affect disposable income 
for leisure-time activities.  Unit sales of recreational vehicles (excluding 
conversion vehicles) reached a peak of approximately 259,000 units in 1994 
and declined to approximately 247,000 units in 1996.  Although unit sales of 
High-Line Class A motor coaches have increased in each year since 1989, there 
can be no assurance that this trend will continue.  Furthermore, as a result 
of the Holiday Acquisition, the Company offers a much broader range of 
recreational vehicle products and will likely be more susceptible to 
recreational vehicle industry cyclicality than in the past.  Factors 
affecting cyclicality in the recreational vehicle industry include fuel 
availability and fuel prices, prevailing interest rates, the level of 
discretionary spending, the availability of credit and overall consumer 
confidence.  In particular, interest rates rose significantly in 1994 and 
while recent interest rates have not had a material adverse effect on the 
Company's business, no assurances can be given that an increase  in interest 
rates would not have a material adverse effect on the Company's business, 
results of operations and financial condition.
                                             
MANAGEMENT OF GROWTH.  As a result of the Holiday Acquisition, the Company 
has experienced significant growth in the number of its employees, in the 
size of its manufacturing operations and in the scope of its business.  This 
growth has resulted in the addition of new management personnel, increased 
responsibilities for existing management personnel, and has placed added 
pressure on the Company's operating, financial and management information 
systems.  While management believes it has substantially completed the 
integration of Holiday Rambler's operations and personnel into the Company, 
due to the large size of the Holiday Acquisition relative to the Company, 
there can be no assurance that the Company will not encounter problems in the 
future associated with the integration of Holiday Rambler's operations and 
personnel or that the anticipated benefits of the Holiday Acquisition will be 
fully realized.  In addition, there can be no assurance that the Company will 
adequately support and manage the growth of its business and the failure to 
do so could have a material adverse effect on the Company's business, results 
of operations and financial condition.
                                           
MANUFACTURING EXPANSION.  The Company significantly increased its 
manufacturing capacity in 1995 by expanding its Elkhart,  Indiana facility 
and opening its Coburg, Oregon facility.  In order to meet market demand and 
realize manufacturing efficiencies, the Company has recently completed 
construction of a new motor coach manufacturing facility in Wakarusa, 
Indiana, and intends to relocate its Elkhart, Indiana motor coach

                                                                           16
<PAGE>

production to the new Wakarusa facility, and recently completed the set-up of 
the new Springfield, Oregon facility to manufacture towables.  The 
integration of the Company's facilities and the expansion of the Company's 
manufacturing operations involve a number of risks including unexpected 
production difficulties.  In 1995, the Company experienced start-up 
inefficiencies in manufacturing the Windsor model and, beginning in 1996 and 
continuing in the first half of 1997, the Company has experienced difficulty 
in increasing production rates of motor coaches at its Coburg facility.  
There can be no assurance that the Company will successfully integrate its 
manufacturing facilities or that it will  achieve the anticipated benefits 
and efficiencies from its expanded manufacturing operations.  In addition, 
the Company's operating results could be materially and adversely affected if 
sales of the Company's products do not increase at a rate sufficient to 
offset the Company's increased expense levels resulting from this expansion.
                                             
The set-up of the new facilities involves risks and costs associated with the 
development and acquisition of new production lines, molds and other 
machinery, the training of employees, and compliance with environmental, 
health and safety and other regulatory requirements.  The inability of the 
Company to commence full-scale commercial production at its Wakarusa and 
Springfield facilities in a timely manner could have a material adverse 
effect on the Company's business, results of operations and financial 
condition.  In addition, at such time as the Company commences production at 
these new facilities, it may from time to time experience lower than 
anticipated yields or production constraints that may adversely affect its 
ability to satisfy customer orders.  Any prolonged inability to satisfy 
customer demand could have a material adverse effect on the Company's 
business, results of operations and financial condition.
                                             
CONCENTRATION OF SALES TO CERTAIN DEALERS.  Although the Company's products 
were offered by more than 150 dealerships located primarily in the United 
States and Canada as of June 28, 1997, a significant percentage of the 
Company's sales have been and will continue to be concentrated among a 
relatively small number of independent dealers.  Although no single dealer 
accounted for as much as 10% of the Company's net sales in 1996, the top 
three dealers accounted for approximately 22.5% of the Company's net sales in 
that period. The loss of a significant dealer or a substantial decrease in 
sales by such a dealer could have a material adverse effect  on the Company's 
business, results of operations and financial condition.
                                             
POTENTIAL LIABILITY UNDER REPURCHASE AGREEMENTS.  As is common in the 
recreational vehicle industry, the Company enters into repurchase agreements 
with the financing institutions used by its dealers to finance their 
purchases.  These agreements obligate the Company to repurchase a dealers' 
inventory under certain circumstances in the event of a default by the dealer 
to its lender.  In 1993, the Company's then third largest dealer went into 
default with its lenders, and the Company was required to repurchase 16 motor 
coaches.  Although the Company was able to resell these motor coaches within 
three months, the Company incurred expenses of approximately $291,000 in 
connection with this dealer's default.  Additionally, the need to resell 
these motor coaches and the loss of that dealer temporarily limited the 
Company's sales of new motor coaches.  If the Company were obligated to 
repurchase a significant number of its products in the future, it could have 
a material adverse effect on the Company's financial condition, business and 
results of operations.  The Company's contingent obligations under repurchase 
agreements vary from period to period and totaled approximately $129.3 
million as of June 28, 1997, with approximately 10.2% concentrated with one 
dealer.  See "Liquidity and Capital Resources" and Note 10 of Notes to the 
Company's Condensed Consolidated Financial Statements.
                                             
AVAILABILITY AND COST OF FUEL.  An interruption in the supply or a 
significant increase in the price or tax on the sale of diesel fuel or 
gasoline on a regional or national basis could have a material adverse effect 
on the Company's business, results of operations and financial condition.  
Diesel fuel and gasoline have, at various times in the past, been difficult 
to obtain, and there can be no assurance that the supply of diesel fuel or 
gasoline will continue uninterrupted, that rationing will not be imposed, or 
that the price of or tax on diesel fuel or gasoline will not significantly 
increase in the future, any of which could have a material adverse effect on 
the Company's business, results of operations and financial condition.
                                           
DEPENDENCE ON CERTAIN SUPPLIERS.  A number of important components for 
certain of the Company's products are purchased from single or limited 
sources, including its turbo diesel engines (Cummins Engine Company, Inc.), 
substantially all of its transmissions (Allison Transmission Division of 
General Motors Corporation), axles for all diesel motor coaches other than 
the Holiday Rambler Endeavor Diesel model (Eaton Corporation) and chassis for 
certain of its Holiday Rambler products (Chevrolet Motor Division of General 
Motors Corporation, Ford Motor 

                                                                           17

<PAGE>

Company and Freightliner Custom Chassis Corporation).  The Company has no 
long term supply contracts with these suppliers or their distributors, and 
there can be no assurance that these suppliers will be able to meet the 
Company's future requirements for these components. Although the Company 
believes that adequate alternative suppliers exist for each of these 
components, an extended delay or interruption in the supply of any of the 
components currently obtained from a single source supplier or limited 
supplier could have a material adverse effect on the Company's business, 
results of operations and financial condition. 
                                            
NEW PRODUCT INTRODUCTIONS.  To address changing consumer preferences, the 
Company modifies and improves its products each model year and typically 
redesigns each model every three to four years.  The Company believes that 
the introduction of new features and new models will be critical to its 
future success.  Delays in the introduction of new models or product 
features, a lack of market acceptance of new models or features, or quality 
problems with new models or features could have a material adverse effect on 
the Company's business, results of operations and financial condition.  For 
example, in the third quarter of 1995 the Company incurred unexpected costs 
associated with three model changes introduced in that quarter which 
adversely affected the Company's gross margin.  There also can be no 
assurance that product introductions in the future will not divert revenues 
from existing models and adversely affect the Company's business, results of 
operations and financial condition.
                                              
COMPETITION.  The market for the Company's products is highly competitive.  
The Company currently competes with a number of other manufacturers of motor 
coaches, fifth wheel trailers and travel trailers, some of which have 
significantly greater financial resources and more extensive marketing 
capabilities than the Company. There can be no assurance that either existing 
or new competitors will not develop products that are superior to, or that 
achieve better consumer acceptance than, the Company's products, or that the 
Company will continue to remain competitive.
                                             
RISK OF LITIGATION.  The Company is subject to litigation arising in the 
ordinary course of its business, including a variety of product liability and 
warranty claims typical in the recreational vehicle industry.  In addition, 
as a result of the Holiday Acquisition, the Company assumed most of the 
liabilities of Holiday Rambler, including product liability and warranty 
claims.  Although the Company does not believe that the outcome of any 
pending litigation will have a material adverse effect on the business, 
results of operations or financial condition of the Company, due to the 
inherent uncertainties associated with litigation, there can be no assurance 
in this regard.
                                             
To date, the Company has been successful in obtaining product liability 
insurance on terms the Company considers acceptable.  The Company's current 
policies jointly provide coverage against claims based on occurrences within 
the policy periods up to a maximum of $26.0 million for each occurrence and 
$27.0 million in the aggregate. There can be no assurance that the Company 
will be able to obtain insurance coverage in the future at acceptable levels 
or that the costs of insurance will be reasonable. Furthermore, successful 
assertion against the Company of one or a series of large uninsured claims, 
or of one or a series of claims exceeding any insurance coverage, could have 
a material adverse effect on the Company's business, results of operations 
and financial condition.
                                             
ENVIRONMENTAL REGULATION AND REMEDIATION
                                             
REGULATION.  The Company's recreational vehicle manufacturing operations are 
subject to a variety of federal and state environmental regulations relating 
to the use, generation, storage, treatment and disposal of hazardous 
materials.  These laws are often revised and made more stringent, and it is 
likely that future amendments to these laws will impact the Company's 
operations.
                                             
The Company has submitted applications for "Title V" air permits for its 
operations in Elkhart, Indiana, Nappanee, Indiana, Wakarusa, Indiana, and 
Coburg, Oregon, and is in the process of preparing an application for its 
newly acquired facility in Springfield, Oregon.  The Company does not 
currently anticipate that any additional air pollution control equipment will 
be required as a condition of receiving new air permits, although new 
regulations and their interpretation may change over time, and there can be 
no assurance that additional expenditures will not be required.
                                             
The Company believes that there are no ongoing violations of any of its 
existing air permits at any of its owned or leased facilities at this time.  
However, the failure of the Company to comply with present or future 
regulations could subject the Company to: (i) fines; (ii) potential civil and 
criminal liability; (iii) suspension of production or cessation 

                                                                           18
<PAGE>

of operations; (iv) alterations to the manufacturing process;  or (v) costly 
clean-up or capital expenditures, any of which could have a material adverse 
effect on the Company's business, results of operations and financial 
condition.
                                             
REMEDIATION.  The Company has identified petroleum and/or solvent ground 
contamination at the Elkhart, Indiana manufacturing facility, the Wakarusa, 
Indiana manufacturing facility and the  Leesburg, Florida dealership acquired 
in the Holiday Acquisition.  The Company has remediated the Elkhart site and 
recommended to the relevant Indiana regulatory authority that no further 
action be taken because the remaining contaminants are below the state's 
clean-up standards.  The Company currently expects that the regulatory 
authority will concur with this finding, although there is no assurance that 
such approval will be forthcoming or that the regulatory authority will not 
require additional investigation and/or remediation. The Company has 
completed its investigation of the Wakarusa site and expects soon to 
recommend to the relevant regulatory authority that no further action be 
taken at that site based on its consultants' view that there is a limited 
risk associated with the remaining contamination.  It is unclear whether the 
regulatory authority will concur in this finding or whether additional 
remediation will be required.  In Florida, the Company and its consultants 
are conducting additional site investigations to determine the extent of 
contamination associated with former underground storage tanks at the 
Leesburg dealership.  Pending the completion of the additional site 
investigation work, Harley-Davidson and its consultant are preparing a site 
remediation work plan for submittal to the relevant Florida regulatory 
authority.  With regard to the Wakarusa and Leesburg sites,  the Company is 
indemnified by Harley-Davidson for investigation and remediation costs 
incurred by the Company (subject to a $300,000 deductible in the case of the 
Wakarusa site and subject to a $10 million maximum in the case of the 
Wakarusa site and a $5 million maximum in the case of the Leesburg site for 
matters, such as these, that were identified at the closing of the Holiday 
Acquisition).
                                             
The Company does not believe that any costs it will bear with respect to 
continued investigation or remediation of the foregoing locations and other 
facilities currently or formerly owned or occupied by the Company will have a 
material adverse effect upon the Company's business, results of operations or 
financial condition. Nevertheless, there can be no assurance that the 
Company will not discover additional environmental problems or that the cost 
to the Company of the remediation activities will not exceed the Company's 
expectations.
                                           
OTHER REGULATORY MATTERS.  The Company, its products and its manufacturing 
operations are subject to a variety of federal, state and local regulations, 
including the National Traffic and Motor Vehicle Safety Act and numerous 
state consumer protection laws and regulations relating to the operation of 
motor vehicles, including so-called "Lemon Laws."  Amendments to these 
regulations and laws and the implementation of new regulations and laws could 
significantly increase the costs of manufacturing, purchasing, operating or 
selling the Company's products and could have a material adverse effect on 
the Company's business, results of operations and financial condition.  The 
failure of the Company to comply with present or future regulations and laws 
could subject the Company to fines, potential civil and criminal liability, 
suspension of production or cessation of operations.
                                           
Certain U.S. tax laws currently afford favorable tax treatment for the 
purchase and sale of recreational vehicles that are financed through mortgage 
loans.  These laws and regulations have historically been amended frequently, 
and it is likely that further amendments and additional laws and regulations 
will be applicable to the Company and its business in the future.  Amendment 
or repeal of these laws and regulations and the implementation of new laws 
and regulations could have a material adverse effect on the Company's 
business, results of operations and financial condition.
                                           
The Company is subject to regulations that may require the Company to recall 
products with safety defects.  Product defects may also result in a large 
number of product liability or warranty claims.  The Company has on occasion 
voluntarily recalled certain products.  The occurrence of a major product 
recall or the incurrence of warranty claims in excess of warranty reserves in 
any period could have a material adverse effect on the Company's business, 
results of operations and financial condition.
                                           
POSSIBLE  VOLATILITY OF STOCK PRICE.  The Company believes that the market 
price of the Company's Common Stock could be subject to wide fluctuations in 
response to quarter-to-quarter variations in operating results, changes in 
earnings estimates by investment analysts, announcements of new products by 
the Company or its competitors, general economic conditions and conditions in 
the recreational vehicle market and other events or factors.  In addition, 
the stocks of many recreational vehicle companies have experienced price and 
volume fluctuations that 


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<PAGE>

have not necessarily been directly related to the companies' operating 
performance, and the market price of the Company's Common Stock could 
experience similar fluctuations.
                                           
                                           
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 
                                           
         Not applicable.



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<PAGE>

                              PART II - OTHER INFORMATION
                                           
ITEM 1.   LEGAL PROCEEDINGS.
                                           
     The Company is involved in legal proceedings arising in the ordinary 
     course of its business, including a variety of product liability and 
     warranty claims typical in the recreational vehicle industry.  In 
     addition, in connection with the Holiday Acquisition, the Company 
     assumed most of the liabilities of that business, including product 
     liability and warranty claims.  The Company does not believe that the 
     outcome of its pending legal proceedings will have a material adverse 
     effect on the business, financial condition or results of operations 
     of the Company.
                                           
                                           
                                           
ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
                                            
     (a)  Exhibits
    
          27.1  Financial data schedule.

     (b)  Reports on Form 8-K

          No reports on Form 8-K were required to be filed during the quarter
          ended June 28, 1997, for which this report is filed.




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<PAGE>

                                      SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.

                                        MONACO COACH CORPORATION



Dated:       AUGUST 12, 1997                 /S/:  John W. Nepute 
       --------------------------       ----------------------------------
                                        John  W. Nepute
                                        Vice President of Finance and
                                        Chief Financial Officer (Duly
                                        Authorized Officer and Principal
                                        Financial Officer)


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