The Coast Distribution System Inc., a key aftermarket supplier to the recreational vehicle and outdoor recreation industries, reported a 59% increase in net income for its third quarter, ended Sept. 30, on lower sales.
“We are pleased with our solid balance sheet performance during the third quarter, as well as the positive impact of our strategy to increase sales of our propriety products,” said Jim Musbach, CEO for the Morgan Hill, Calif.-based company. “As a result of these efforts, we saw improved gross margin in this year’s third quarter, despite a decrease in net sales. Our slightly lower net sales reflected the effect of poor weather conditions this summer, which dampened RV usage and resulted in a decrease in our sales of air conditioners as compared to the third quarter of last year.
Net income for the third quarter totaled $487,000, or 10 cents per diluted share, compared to 307,000, or 7 cents per diluted share the year prior. The company reported that operating income increased 86% to $1 million while gross profits increased by $411,000 to $6.1 million.
Sales for the year’s third quarter fell by 4% to $33.1 million from $34.5 million in the third quarter of 2012. SG&A expenses decreased by $69,000, or 1.3%, to $5.1 million in the quarter compared to the previous year.
For the first nine months, Coast reported net earnings of $645,000, or 14 cents per diluted share, compared to a net loss of $534,000, or 12 cents per diluted share, for the first nine months of 2012. The increase was due to a $1.3 million rise in net sales to $94.1 million from $92.8 million, coupled with a $2.7 million, or 18.6%, increase in gross profits to $17.4 million.
Coast said the increase in gross profits resulted primarily from a change in the mix of products sold, which included a higher percentage of proprietary products on which it realized higher gross margin, as well as the implementation of selected price increases in the first quarter of 2013. As a result of these factors, Coast reported operating income of $1.9 million in the first nine months of 2013, compared to an operating loss of $198,000 for the first nine months of 2012.
On the balance sheet, inventory decreased $2.6 million to $28.1 million at Sept. 30 compared to $30.7 million a year ago. Long-term debt decreased to $8.8 million from $11.7 million.
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