Morgan Hill, Calif.-based aftermarket supplier Coast Distribution System Inc. today (Aug. 15) reported financial results for the second quarter ended June 30.
Coast reported net income of $1.0 million, or $0.21 per diluted share, for the second quarter compared to net income of $1.2 million, or $0.26 per diluted share, in the same quarter of 2010. Sales for the quarter fell 4.1% to $33.2 million compared to sales of $34.6 million the previous year. Coast said the decrease in sales during the quarter was the result of the slowing of the economy and weak consumer spending.
Gross profits in the second quarter declined by $0.4 million, resulting in a decrease in gross margin to 19% in the 2011 second quarter from 19.4% in the same quarter of 2010. Selling, general and administrative expenses decreased by 2.5% to $4.6 million compared to $4.7 million in the same quarter in 2010. Coast said this improvement was primarily a 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, as well as a reduction in bad debt write-offs, when compared to the same quarter in the previous year.
Operating expenses were adversely impacted by the strengthening Canadian dollar, resulting in higher expense levels when operating expenses from Coast’s Canadian operations are translated to U.S. dollars and consolidated. Without the impact of foreign exchange, operating expenses would have shown further improvement.
On the balance sheet, accounts receivable totaled $15.7 million in the second quarter, an increase of $1.3 million compared with the balance at the end of the second quarter of 2010. Inventories at June 30 were $29.3 million, a decrease of $0.5 million compared with $29.8 million at June 30, 2010. The company typically builds inventories during the first half of the year in anticipation of improved customer orders during the spring and summer months, when product sales increase due to seasonal increases in usage and purchases of RVs and boats. The reduction in inventory levels from the prior year was due primarily to lower sales levels along with active management of inventory turnover. Long-term debt was reduced to $12.7 million, from $13.3 million a year ago, reflecting the strength of Coast’s balance sheet.
“The slowing economy and resulting weakness in consumer spending along with additional weakness in our industry took their toll on our results in the second quarter,” said Coast CEO Jim Musbach. “Concerns over unemployment and price inflation eating away at discretionary spending negatively impacted the sales and use of RVs in the first half of 2011.”
For the six-month period, Coast reported a net loss of $59,000, or ($0.01) per diluted share, on net sales of $57.9 million, compared with net earnings of $1.2 million, or $0.26 per diluted share, on net sales of $58.7 million in the same six-month period of 2010. The net loss was attributable to the loss of $1.0 million incurred in this year’s first quarter which was largely offset by Coast’s second quarter earnings.
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The Coast Distribution System Inc. , Morgan Hill, Calif., today (May 13) reported financial results for the first quarter ended March 31 highlighted by revenue growth and improved bottom line results.
Coast, one of North America’s largest aftermarket suppliers of replacement parts, accessories and supplies for the recreational vehicle, boating and outdoor recreation industries, reported net income of $22,000, or $0.00 per diluted share, for the first quarter of 2010 as compared to a net loss of $0.9 million, or $0.20 per diluted share for the first quarter of 2009.
That nearly $1 million year-over-year improvement was primarily attributable to increases in net sales and gross margin, and a reduction in selling, general and administrative (SG&A) expenses in this year’s first quarter.
Net sales increased by 3.9% to $24.1 million in the first quarter of 2010 as compared to $23.2 million in the same quarter of 2009. Gross margin increased to 20.4% in the 2010 first quarter, up from 18.6% in the same quarter of 2009.
The improvements in both sales and gross margin were attributable to the company’s Canadian operations, and were due primarily to an improving Canadian economy and a strengthening of the Canadian dollar vis-a-vis the U.S. dollar. Sales and gross margin in the United States declined slightly in the first quarter due to the ongoing impact of the economic recession and credit crisis.
In the 2010 first quarter, the company reduced SG&A expenses by $0.7 million, a decrease of 12.3% as compared to the 2009 first quarter. That reduction was due primarily to a 10% across-the-board reduction in salaries and wages, which became effective in February 2009, and continued implementation of other cost-cutting measures that were initiated in the latter part of 2008 in response to the economic recession and credit crisis.
On the balance sheet, accounts receivable increased by $1.2 million, to $17.9 million, from $16.7 million at March 31, 2009, as a result of the increase in sales in Canada. Inventories at March 31 were $25.2 million, a decrease of $5.6 million compared with $30.8 million a year earlier, which was attributable to the company’s cost savings measures and the reduction in consumer demand primarily in the United States. As a result of the reduction in inventories at March 31, 2010, the company was able to reduce long-term debt by 37% to $12.8 million at March 31, 2010 from $20.2 million at March 31, 2009.
“The actions we implemented in response to the difficult economic and industry conditions over the last six quarters provided the foundation for the solid financial results we posted to start 2010,” said Coast CEO Jim Musbach. ”The improvement in our results was driven by the strength of margins at our Canadian operations combined with continued control over the company’s SG&A expenses.
” We achieved our better overall financial results despite the absence of strength in our U.S. operations, which posted slight declines in sales and gross margins in this year’s first quarter. Although wholesale shipments of recreational vehicles improved industrywide in the first quarter, we believe that improvement was driven by inventory rebuilding at the dealer level rather than significantly improved retail sales. As a result, it may take more time for these factors to translate into improved sales and usage of RVs and boats, which would in turn generate better results for Coast.”