Coast Distribution Reporting Net Sales Increase
The Coast Distribution System Inc., one of North America’s largest aftermarket suppliers of replacement parts, accessories and supplies for the RV and outdoor-recreation industries, reported financial results for the second quarter and six months ended June 30.
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, according to the company’s announcement. Over the past 12 months, the company has increased its product portfolio with the addition of more than 1,000 new distributed products, which are products they sell under the manufacturers’ 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, the company reported.
Gross profit for the second quarter of 2014 decreased to $7 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 in connection with the closure of an import facility in Taiwan which the company said it no longer needed for operations. According to the earnings announcement, company leaders expect the closure of that facility will enable Coast to increase its gross margin on imported goods in the future.
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%, to $11.2 million, in the first six months of 2014, from $11.3 million for the same period of 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,” said Coast CEO 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 1,000 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,” he said.
“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.