The Coast Distribution System Inc., one of North America’s largest aftermarket suppliers of replacement parts, accessories and supplies for the recreational vehicle and outdoor recreation industries, today reported a 117.7% increase in net income on improved sales for its second quarter, ended June 30.
Morgan Hill, Calif.-based Coast posted earning of $1.1 million, or 23 cents per diluted share, up from $0.5 million, or 11 cents per diluted share, in the second quarter. Sales for the quarter increased 4.3% to $35.6 million compared to net sales of $34.1 million in the second quarter of 2012, primarily as a result of strengthening economic conditions and increasing consumer confidence.
Coast noted it has been slowly reducing its presence in the marine aftermarket this year. As a result, the increase in overall net sales reflects stronger growth in RV market sales offset by a decrease in sales to the marine market. Also contributing to the increase was an increase in sales of Coast’s higher margin proprietary products to specialty retailers and mass merchandisers, which represents a relatively new distribution channel for the company.
Gross profit in the second quarter of 2013 increased by $1.5 million, to $7.1 million, resulting in an increase in gross margin to 20.1% from 16.4% in the same quarter of 2012. SG&A increased 7.4% to $5.1 million from $4.8 million in the prior year while operating income more than doubled to $2 million from $0.8 million.
For the first six months, Coast reported a net profit of $158,000, or 3 cents per diluted share, compared to a net loss of $841,000, or 18 cents per diluted share for the same period in 2012. Net sales increased 4.5% to $61 million from $58.4 million the year prior. The increased sales resulted in a 26% increase in gross profits to $11.3 million in $9 million in the same period of 2012. The increase in gross profits was partially offset by a $737,000, or 7.5%, increase in SG&A expenses in the six months ended June 30, 2013. As a result of these factors, Coast reported operating income of $0.8 million in the first six months of 2013 compared to an operating loss of $0.8 million for the first six months of 2012.
“We have maintained a strategic focus on growing market share and focusing on expanding sales of our higher-margin proprietary products. In the second quarter that strategy began to pay off as we saw a 27% improvement in gross profit on a much smaller increase in net sales, highlighting the profit opportunity associated with our proprietary products and new market channels. We have also seen gathering momentum in the RV market as consumers have continued to engage in the RV lifestyle, which is a strong driver for our business,” said Coast’s CEO Jim Musbach. “We remain committed to our strategic goal for 2013 of returning to profitability through continued investment in our higher-margin proprietary products. We plan to establish new product supply relationships, including relationships that enable us to increase the products that we source from lower cost, but high-quality, overseas suppliers, to support our growth strategy as we focus on our rapidly recovering core RV market. All of these factors make us confident about our ability to achieve our profit goals for the full year.”
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