Coast Distribution System Inc., a leading aftermarket supplier to the RV, marine and outdoor recreation industries, still sees tough times ahead for the RV industry.
“The continued lack of available consumer and business credit and the worsening of and concerns and uncertainties among businesses and consumers regarding the ultimate severity and duration of the economic recession have continued into 2009,” management stated in its 10-K filing with the Securities and Exchange Commission.
“We expect these economic and other conditions to continue to adversely affect the purchase and usage by consumers of RVs and boats and, therefore, their need for and purchases of the products that we sell, during 2009.”
The Morgan Hill, Calif.-based supplier reported a net loss of $2.3 million on sales of $16.9 million for the fourth quarter of 2008 and a loss of $1.8 million on sales of $132.2 million for all of 2008. Net sales in the 2008 fourth quarter declined 37% year-over-year, as the RV and boating industries both reported double-digit declines in shipments for the year.
Coast CEO Jim Musbach noted in a news release on Tuesday (March 31) that the company has already reduced its staffing levels by 30% and replaced its trade show with a more efficient and effective online sales program. It also restructured its sales department to focus more on inside sales to existing accounts, and has worked with vendors and landlords to secure discounts.
“Moreover, in the past few months,” the company stated further in its SEC filing, “the Canadian dollar has weakened against the U.S. dollar, as Canada is also suffering through an economic recession and, as a result, our Canadian subsidiary is experiencing increases in its costs of products sold, thereby adversely affecting our consolidated operating results.
“In addition, our bank loan agreement was recently amended, largely due to the tightening of available business credit and the impact of the economic recession on our operating results. That amendment reduces the maximum amount of borrowings we can obtain under our revolving bank credit line and increases the costs to us of such borrowings.
“These amendments also may adversely affect our net sales because we may not be able to purchase as much inventory of the products we sell, which could adversely affect our service levels to our customers, and we may have to tighten the credit that we can extend to our customers in connection with their purchases of products from us.”
Looking ahead, the company added, “Our strategic goals for 2009 are to capture additional market share in order to offset declines in net sales attributable to these difficult economic conditions, and to improve our gross margin, despite these conditions, primarily by continuing to increase our sales of proprietary products and other foreign sourced products.
“In addition, in response to this difficult economic climate, we are continuing to reduce our SG&A expenses by implementing additional staff reductions and negotiating price concessions from our suppliers. As a result, we believe that we can achieve a modest improvement in our operating results in 2009, as compared to 2008, assuming that economic and market conditions in the United States and Canada stabilize and the availability of credit to businesses and consumers increases.
“On the other hand, if such conditions do not begin to improve in 2009, it may become necessary for us to take additional cost-cutting measures, which could include the closing of one or more of our distribution centers.
“However, due to the risks in the economy and in our business and the uncertainties that exist regarding future economic and market conditions, it is not possible to predict with any degree of accuracy whether we will succeed in achieving our goals for 2009.”