Coast Distribution System improving its margins

MORGAN HILL, Calif. – The Coast Distribution System, Inc. (Amex: CRV), a supplier of aftermarket replacement parts, accessories and supplies for the RV, marine and outdoor recreation industries, saw its gross margins increase during the first quarter ended March 31 despite a decline in revenues and an increase in net losses, the company reported in a recent statement.

Coast experienced a net loss of $850,000, or $0.19 per diluted share, on net sales of $39.5 million for the first quarter of 2008. For the same period of 2007, Coast reported a net loss of $642,000, or $0.15 per diluted share, on net sales of $43.6 million.

The company’s gross margin was 20.0 percent for the 2008 first quarter, a 7.0 percent, year-over-year improvement over gross margin of 18.7 percent in the corresponding quarter of 2007, it stated. Coast attributed the increase in gross margin to additional sales of higher-margin imported products and improved pricing. The 2008 first quarter marked the third consecutive quarter of gross margin improvement, according to the company.

Coast attributed the nearly $4.2 million, or 9.6 percent, year-over-year decline in first quarter sales to decreases in the purchases and in the usage of RVs by consumers, which affects sales traffic to RV dealers, Coast's primary customer. The Recreational Vehicle Industry Association (RVIA) reported an 11.8 percent year-over-year decline in wholesale shipments of recreational vehicles for the first three months of 2008, the company explained. Pleasure boat retailers also reported sales declines for that same three-month period.

"Increased fuel prices, the credit crunch and economic uncertainties continue to adversely affect the RV and marine industries as a whole, including the aftermarket," said Coast's Chief Executive Officer and President James Musbach. "Despite the decline in sales, our pre-tax loss in this year's first quarter was nearly the same as the pre-tax loss in last year's first quarter. We believe this is an indication of our stronger market position, as well as our improved cost management, including SG&A costs. When our core markets eventually return to growth, Coast will be positioned to achieve meaningful improvements in our operating results.

"In the meantime, we continue to anticipate a difficult year in 2008 based on conditions in the RV and marine industries. Our focus will be on areas which management can directly control, such as improving margins by increasing sales of Coast sourced and exclusive products."

In April 2008, Coast's Board of Directors promoted Jim Musbach, the company's president and COO, to CEO. Musbach also continues to serve as Coast's president. Thomas R. McGuire, the former CEO, continues to serve as the company's executive chairman.

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