Coast Dist. Reports Rise In Quarterly Net Sales
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, on Aug. 21 reported financial results for the second quarter and six months ended June 30, 2014.
According to a release, net sales for the 2014 second quarter increased by 3.5%, to $36.8 million, compared to net sales of $35.6 million in the second quarter of 2013, notwithstanding the unusually severe winter weather conditions that continued into the quarter, which delayed the start of the RV season in the Midwestern, Northeastern, and Southeastern regions of the United States and throughout most of Canada.
Over the past 12 months, the company, based in Morgan Hill, Calif., said it has increased its product portfolio with the addition of more than 1,000 new distributed products, which are sold under the manufacturers’ brands as opposed to those sold under its own brands. The increase in net sales during the second quarter was due in large part to sales of these new products, as well as an increase in sales to specialty retailers.
Gross profit for the second quarter of 2014 decreased to $7.0 million, from approximately $7.1 million in the same quarter of 2013. As a result, gross margin decreased to 18.9% of net sales, down from 20.1% in the same quarter of 2013.
The decreases were mainly due to a change in the mix of products sold to a higher proportion of lower-margin, distributed products. Gross profit and gross margin were further impacted by costs we recognized in connection with the closure of an import facility in Taiwan which we no longer needed for our operations. The company expects the closure of that facility will enable Coast to increase its gross margin on imported goods in the future.
Selling, general and administrative (SG&A) expenses in the 2014 second quarter were $5.5 million, compared to $5.1 million in the same quarter of 2013. That increase was primarily attributable to increases in marketing and selling costs and professional fees.
For the first six months of 2014, Coast reported net earnings of $49,000, or $0.01 per diluted share, compared to net earnings of $158,000, or $0.03 per diluted share, for the first six months of 2013. Net sales increased 1.1%, to $61.7 million, up from $61.0 million for the same six months of 2013. Gross profit decreased by 1.4%11.2 million, in the first six months of 2014, from $11.3 million for the same period of 2013. SG&A expenses were $10.6 million, compared to $10.5 million for the six months ended June 30, 2013.
On the balance sheet, accounts receivable increased by $98,000, to $13.6 million, at June 30, 2014, up from $13.5 million at June 30, 2013. Inventories at June 30, 2014, were $37.0 million, compared with $31.4 million at June 30, 2013.
“We are disappointed with our financial results this quarter, which included the negative impact of costs recognized in connection with the closing of the Taiwan facility and delays in obtaining some of our proprietary products from Asia,” stated Coast’s Chief Executive Officer Jim Musbach. “The tough operating environment, hampered by the late start of the RV season in our primary markets that was caused by prolonged winter weather conditions, compounded the negative impact. Yet, we continued to achieve sales growth in spite of these hurdles.”
Musbach continued, “Looking forward, we are optimistic that our new product offerings will contribute positively to our results during the remainder of 2014. During the past year, we substantially boosted our product portfolio with the addition of more than one thousand new distributed products, which include Purple Line Products for which we have obtained exclusive North American distribution rights from the manufacturer. In addition, in the fall of this year, we will be introducing several new proprietary products which we believe will help to boost our sales and gross margin.”
“Additionally, the Recreation Vehicle Industry Association (RVIA) currently forecasts for RV industry shipments to increase by approximately 8.8% in 2014, and it expects RV shipments to rise again in 2015. Based on the RVIA forecasts, our new product offerings and expanded marketing programs, we expect to see positive momentum in the coming quarters. Our business fundamentals are strong and well positioned for future growth, and our strategy remains to remain focused on the customers in our core RV channel,” concluded Musbach.
For more information, visit www.coastdistribution.com,