The Coast Distribution System Inc., an aftermarket suppliers of replacement parts, accessories and supplies for the recreational vehicle and outdoor recreation industries, today reported a double-digit gain in sales for its first quarter, ended March 31.
The Morgan Hill, Calif.-based company reported net sales for the first quarter increased by 15% to $28.5 million, compared to net sales of $24.9 million in the first quarter of 2014. Sales increased across all of Coast’s business channels including the core RV dealer channel, as well as its alternate channels. The positive growth continues the trend that began in the second quarter of 2014, producing sequential quarterly gains throughout 2014, including a 12% year-over-year increase in net sales during the fourth quarter.
Coast reduced its operating loss by 43%, or $413,000, to $543,000 for the quarter ended March 31, 2015, down from $956,000 in the same quarter of 2014. The company also reduced its net loss in the traditionally weak first quarter to $475,000, or 10 cents per diluted share, from a net loss of $738,000, or 15 cents per diluted share, for the same period of 2014.
Coast attributes the increase in 2015 first quarter sales to a number of factors, including a recent consolidation of competitors in the RV channel, which enabled Coast to gain market share, and a positive response by customers to newly-introduced towing and outdoor power equipment products, as well as the improvement in RV industry trends due primarily to a strengthening of the economy and increasing consumer confidence.
The company achieved this double-digit sales growth during the first quarter of 2015 despite poor weather conditions in the Northeast, Midwest and Southeast U.S., the West Coast port strike and the negative impact on Canadian sales from inclement weather and the rapid decline of the Canadian dollar in relation to the U.S. dollar.
Additionally, the increase in net sales has continued into the second quarter, with April 2015 sales growing by more than 20% when compared to April 2014. This increase resulted from a 30% increase in net sales in the U.S., which was partially offset by weak Canadian sales.
Gross profit in the 2015 first quarter increased to $4.9 million, up from $4.2 million in the same quarter of 2014, representing a slight improvement as an operating percentage. The company also reported that Selling, General and Administrative (“SG&A”) expenses increased by approximately 4.6%, but declined as a percentage of net sales to 19%, down from 20.8% in the first quarter of 2014. Variable expenses, tied to increased sales, and together with increased professional fees, largely accounted for the rise in SG&A expenses during the first quarter.
On the balance sheet, accounts receivable remained relatively unchanged at $17.7 million at March 31, 2015, as compared to $17.6 million at March 31, 2014. The company increased its inventories at March 31, 2015, to $37.6 million, up from $32.7 million at March 31, 2014, to support expected growth in sales volume.
In addition, the company noted that Bank of America Merrill Lynch extended the maturity date to its credit facility by one year to July 10, 2018, increased the revolving credit line to $30 million and lowered the interest rate by 25 basis points. The credit facility is an important element in the company’s overall financial flexibility, enabling Coast to further increase its inventory to capitalize on market share opportunities and to execute on possible growth strategies.
“We are extremely pleased with the positive momentum that continued during the first quarter,” said Coast CEO Jim Musbach. “We achieved strong sales growth in all channels, despite poor weather, the west coast port strike and Canadian currency weakness.”
Musbach added, “In the second half of 2014, we introduced two new proprietary products, the Center Line TS towing system and the Powerhouse PH4000RiE fuel injected portable generator, in our towing and portable power categories, and they are quickly gaining wide acceptance in our core customer channel. Additionally, in January, we announced our designation as a preferred supplier of aftermarket parts and accessories to the Priority Network of RV dealers, the largest RV dealer and service network in the U.S. Further, Coast continues to benefit from the consolidation currently taking place in the RV industry. Consolidation, coupled with our strategic focus on the RV customer, and the continued solid performance of our teams, is enabling us to make solid gains in market share and achieve substantial growth in the sales of our products.”
Musbach stated, “In conclusion, our outlook for 2015 is for continued double-digit sales growth. Our inventories are balanced, and our service levels are very good. Additionally, we expect to introduce new products and programs, as well as line extensions of existing product lines, which will enable us to continue to drive organic growth during 2015. All in all, we are extremely upbeat.”
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