MORGAN HILL, Calif. — The Coast Distribution System this week reported net income of $22,000 for the first quarter of 2010 as compared to a net loss of $0.9 million for the first quarter of 2009.
The nearly $1 million year-over-year improvement was primarily due to increases in net sales and gross margin and a reduction in selling, general and administrative expenses in this year’s first quarter.
Net sales increased by 3.9 percent to $24.1 million in the first quarter as compared to $23.2 million in the same quarter of 2009. Gross margin increased to 20.4 percent, up from 18.6 percent last year.
The company said improvements in both sales and gross margin were attributable to its Canadian operations and were due primarily to an improving Canadian economy and a strengthening of the Canadian dollar. Sales and gross margin in the U.S. declined slightly in the first quarter.
In the first quarter, the company reduced SG&A expenses by $0.7 million, a decrease of 12.3 percent. That reduction was due primarily to a 10-percent 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, according to the company.
Inventories on March 31 were $25.2 million, a decrease of $5.6 million compared with $30.8 million a year earlier. As a result of the reduction in inventories, the company reduced long-term debt by 37 percent to $12.8 million.
“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 in a release. “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 industry-wide 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.”
Coast supplies aftermarket replacement parts, accessories and supplies for the RV, boating and outdoor recreation industries.