Morgan Hill, Calif.-based aftermarket supplier Coast Distribution System Inc. today (Aug. 15) reported financial results for the second quarter ended June 30.
Coast reported net income of $1.0 million, or $0.21 per diluted share, for the second quarter compared to net income of $1.2 million, or $0.26 per diluted share, in the same quarter of 2010. Sales for the quarter fell 4.1% to $33.2 million compared to sales of $34.6 million the previous year. Coast said the decrease in sales during the quarter was the result of the slowing of the economy and weak consumer spending.
Gross profits in the second quarter declined by $0.4 million, resulting in a decrease in gross margin to 19% in the 2011 second quarter from 19.4% in the same quarter of 2010. Selling, general and administrative expenses decreased by 2.5% to $4.6 million compared to $4.7 million in the same quarter in 2010. Coast said this improvement was primarily a result of several cost reductions, including a reduction in rent expense for the company’s headquarters, which was renegotiated in the first quarter of 2011, as well as a reduction in bad debt write-offs, when compared to the same quarter in the previous year.
Operating expenses were adversely impacted by the strengthening Canadian dollar, resulting in higher expense levels when operating expenses from Coast’s Canadian operations are translated to U.S. dollars and consolidated. Without the impact of foreign exchange, operating expenses would have shown further improvement.
On the balance sheet, accounts receivable totaled $15.7 million in the second quarter, an increase of $1.3 million compared with the balance at the end of the second quarter of 2010. Inventories at June 30 were $29.3 million, a decrease of $0.5 million compared with $29.8 million at June 30, 2010. The company typically builds inventories during the first half of the year in anticipation of improved customer orders during the spring and summer months, when product sales increase due to seasonal increases in usage and purchases of RVs and boats. The reduction in inventory levels from the prior year was due primarily to lower sales levels along with active management of inventory turnover. Long-term debt was reduced to $12.7 million, from $13.3 million a year ago, reflecting the strength of Coast’s balance sheet.
“The slowing economy and resulting weakness in consumer spending along with additional weakness in our industry took their toll on our results in the second quarter,” said Coast CEO Jim Musbach. “Concerns over unemployment and price inflation eating away at discretionary spending negatively impacted the sales and use of RVs in the first half of 2011.”
For the six-month period, Coast reported a net loss of $59,000, or ($0.01) per diluted share, on net sales of $57.9 million, compared with net earnings of $1.2 million, or $0.26 per diluted share, on net sales of $58.7 million in the same six-month period of 2010. The net loss was attributable to the loss of $1.0 million incurred in this year’s first quarter which was largely offset by Coast’s second quarter earnings.
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