The Coast Distribution System Inc. , Morgan Hill, Calif., today (May 13) reported financial results for the first quarter ended March 31 highlighted by revenue growth and improved bottom line results.
Coast, one of North America’s largest aftermarket suppliers of replacement parts, accessories and supplies for the recreational vehicle, boating and outdoor recreation industries, reported net income of $22,000, or $0.00 per diluted share, for the first quarter of 2010 as compared to a net loss of $0.9 million, or $0.20 per diluted share for the first quarter of 2009.
That nearly $1 million year-over-year improvement was primarily attributable to increases in net sales and gross margin, and a reduction in selling, general and administrative (SG&A) expenses in this year’s first quarter.
Net sales increased by 3.9% to $24.1 million in the first quarter of 2010 as compared to $23.2 million in the same quarter of 2009. Gross margin increased to 20.4% in the 2010 first quarter, up from 18.6% in the same quarter of 2009.
The improvements in both sales and gross margin were attributable to the company’s Canadian operations, and were due primarily to an improving Canadian economy and a strengthening of the Canadian dollar vis-a-vis the U.S. dollar. Sales and gross margin in the United States declined slightly in the first quarter due to the ongoing impact of the economic recession and credit crisis.
In the 2010 first quarter, the company reduced SG&A expenses by $0.7 million, a decrease of 12.3% as compared to the 2009 first quarter. That reduction was due primarily to a 10% across-the-board reduction in salaries and wages, which became effective in February 2009, and continued implementation of other cost-cutting measures that were initiated in the latter part of 2008 in response to the economic recession and credit crisis.
On the balance sheet, accounts receivable increased by $1.2 million, to $17.9 million, from $16.7 million at March 31, 2009, as a result of the increase in sales in Canada. Inventories at March 31 were $25.2 million, a decrease of $5.6 million compared with $30.8 million a year earlier, which was attributable to the company’s cost savings measures and the reduction in consumer demand primarily in the United States. As a result of the reduction in inventories at March 31, 2010, the company was able to reduce long-term debt by 37% to $12.8 million at March 31, 2010 from $20.2 million at March 31, 2009.
“The actions we implemented in response to the difficult economic and industry conditions over the last six quarters provided the foundation for the solid financial results we posted to start 2010,” said Coast CEO Jim Musbach. “The improvement in our results was driven by the strength of margins at our Canadian operations combined with continued control over the company’s SG&A expenses.
” We achieved our better overall financial results despite the absence of strength in our U.S. operations, which posted slight declines in sales and gross margins in this year’s first quarter. Although wholesale shipments of recreational vehicles improved industrywide in the first quarter, we believe that improvement was driven by inventory rebuilding at the dealer level rather than significantly improved retail sales. As a result, it may take more time for these factors to translate into improved sales and usage of RVs and boats, which would in turn generate better results for Coast.”