Morgan Hill, Calif.-based Coast Distribution System Inc., one of North America’s largest aftermarket suppliers of replacement parts, accessories and supplies for the recreational vehicle, boating and outdoor recreation industries, reported a slight dip in income and sales for its third quarter, ended Sept. 30.
Coast reported net income of $0.6 million, or $0.13 per diluted share for the third quarter of 2011, compared to $0.7 million, or $0.14 per diluted share in the same quarter of 2010. Sales for the quarter fell 2% to $31.6 million compared to sales of $32.2 million the previous year. The decrease in sales during the quarter was the result of the continued weakness in the economy and in consumer spending.
Gross profits declined by $200,000, resulting in a decrease in gross margin to 18.1% in the 2011 third quarter from 18.2% in the same quarter of 2010. Coast said the decrease in gross margin was the result of slightly higher shipping costs. Selling, general and administrative expenses decreased by $31,000, or 0.7%, to $4,703,000, compared to $4,734,000 in the same quarter in 2010. This slight improvement was primarily the 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.
On the balance sheet, accounts receivable totaled $8.9 million, which was flat compared with the balance at the end of the third quarter of 2010. Inventories at Sept. 30 were $28.2 million, an increase of $1.0 million compared with $27.2 million last year. The increase in inventory levels from the prior year was due primarily to an increase in inventory of the company’s proprietary branded products. Long-term debt increased to $10.9 million, from $9.4 million a year ago, reflecting increased investments in working capital.
“We are pleased with our performance in the third quarter despite the continued softness in our industry, which resulted in a small decrease in the top line,” said Coast’s CEO Jim Musbach. “Even with these broader market challenges, we made progress in increasing the penetration of our branded products, and we began making inroads into a number of large retailers in the United States and Canada, which is a new area for us. We continue to take steps to increase sales, particularly through new supply relationships that should allow us to source from lower cost, high quality overseas suppliers. Overall, despite the adverse conditions, Coast performed well in the quarter, as our earnings held up in the face of industry weakness and our book value per diluted share increased to $6.77, which is more than double our current market value.”
For the nine-month period, Coast reported net earnings of $553,000, or $0.12 per diluted share, on net sales of $89.5 million, compared with net earnings of $1,865,000, or $0.41 per diluted share, on net sales of $91.0 million in the same nine-month period of 2010. The decrease in net income was attributable to the decrease in net sales as a result of weaker economic conditions, combined with severe weather conditions affecting the northeastern United States and Canada in the first half of 2011, which led to decreased usage of RVs and boats by consumers in those areas.
To view the complete report click here.