Coast Distribution reports profitable Q3

MORGAN HILL, Calif. — Aftermarket supplier Coast Distribution System Inc. reported net earnings of $0.9 million in the third quarter despite lower net sales of $29.6 million, according to a recent release. For the same period of 2008, Coast reported a net loss of $0.3 million on net sales of $34.7 million.

The company said the gain was driven by improved margins and a leaner operating structure. The company’s third quarter ended Sept. 30.

Gross margin as a percentage of sales increased to 20.7 percent in Q3, compared to 17.9 percent in the same quarter of 2008. The increase was a result of reduced freight costs, discounts and volume rebates, workforce reductions, and the introduction of additional higher-margin Coast branded products, the company said. During the quarter, Coast reduced selling, general and administrative (SG&A) expenses by $2.1 million, or 30.9 percent as compared to the 2008 third quarter. The company attributed the decrease in SG&A to an aggressive cost control program, which has included reducing staffing levels and company-wide reductions in salaries.

Coast reduced its borrowings under its bank line of credit by $11.2 million, or 55.2 percent year-over-year, and reduced inventory year-over-year by $10.2 million, or 28.8 percent, to $25.3 million.

“Given the difficult industry conditions, we are pleased with our results in the quarter,” CEO Jim Musbach said in the release. “Driving our profits were improved margins, which for a large part were the result of several important yet painful steps we have taken in the past 18 months to create a leaner, stronger company. Looking ahead, our focus is on new product introductions to capture market share and increase volume beginning in 2010.”

Net sales in the 2009 third quarter declined 14.7 percent year-over-year, which management attributed to lower retail traffic at RV and marine dealerships, Coast’s primary customers, reflecting the continuing effects of the recession and credit crisis.

As in past years, the Coast said it expects a loss in the fourth quarter of 2009 due to seasonal slowdown.

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